Leasehold 0.5% exit fee PER YEAR

antokeffort

Buying a leasehold and I can see a clause on the contract - upon selling you will pay 0.5% of the market value per year to the landlord.

I imagine - for example if the property sells at £200,000 in 20 yrs time this would be a payment of £20,000 to the landlord as a conservative estimate. 

How usual / unusual is this - sounds very high not very friendly 

England 

loubel

Is it a retirement flat? 

antokeffort

EDIT: This clause is on the sellers current shared ownership agreement. Not clear if applicable on the new full leasehold.  

DE_612183

I had this on a retirement flat of a relative - it's normally a % per year of the original purchase price.

It was 1% for 10 years, and the purchase price was £80k - so £8k was the amount - the reasoning is that the money goes back into the sinking fund.

Emmia

You may find this guardian article of interest

https://www.theguardian.com/money/2025/sep/09/developer-retirement-flat-sale-price

daveyjp

Very common with retirement flats to cover sinking fund payments, rather than requesting an annual sum.

It reduces the annual service charge payments, which can be importnant for anyone on a fixed income and it also recognises that (unlike the Guardian report) many residents of retirement flats don't live there for decades so payments are usually not as excessive as the report.

eddddy

antokeffort said:

Buying a leasehold and I can see a clause on the contract - upon selling you will pay 0.5% of the market value per year to the landlord.

I imagine - for example if the property sells at £200,000 in 20 yrs time this would be a payment of £20,000 to the landlord as a conservative estimate. 

It depends what happens to the  money raised by the 0.5% payment. Does it simply go to the landlord? Or is a 'deferred service charge' that goes into the sinking fund?

In simplified terms, using your numbers, a 'deferred service charge' should mean that you have your service charge reduced by £1000 a year for 20 years - and pay a lump of £20,000 when you sell instead.


It might help people on a limited income, who would struggle to pay the £1000 a year - so prefer to pay a lump sum of £20,000 out of the sale proceeds.