Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • N4Nikeir
    • By N4Nikeir 12th Feb 18, 11:04 AM
    • 3Posts
    • 2Thanks
    N4Nikeir
    Just found out house is leasehold, not freehold.
    • #1
    • 12th Feb 18, 11:04 AM
    Just found out house is leasehold, not freehold. 12th Feb 18 at 11:04 AM
    So, I'm a first-time buyer, and so I am a little clueless when it comes to the practicalities and expectations, even after having done research. I thought I'd gotten a super good deal on a house (105k for a 3 bedroom semi-detached with drive and garden, just outside a really cute and sort-after village area, with a 15 year mortgage.) I was excited and ready, and then the other day, my solicitor got a hold of the property's title, and well, the title says it all.

    Rather than a freehold, the house is a 999 year sublease (less than 10 days) with a peppercorn ground rent. This came as a shock to me, and when I approached the estate agent responsible for selling the house, even she seemed surprised (though she also said the length of the lease should not present a problem.) My solicitor has not been all that useful in telling me what all the terms mean, either. When I asked him what a peppercorn ground rent was, he went on some confusing spiel about literal peppercorns that just left me more puzzled (a quick google revealed that it was a very small or nominal ground rent.) Because he has been so confusing on that front, I have not asked him what he means by a "sub-lease" as opposed to a lease, or what is meant by "less than 10 days." Googling has been not been helpful for these terms.

    My solicitor, however, has been adamant that there is no chance of escalating ground rent, as this property is not a new-build, and so is not subject to an escalating rent review. He also seems confident that this will not affect the value of the property (which I find a bit unbelievable.) Thus, he is advising me to continue with the purchase, and my lender is also not concerned about the tenure of the property. I've spoken to my father about this, and he also seems confident about the purchase, particularly as my solicitor has said I should still continue. However, I'd really like some outside advice. I know I've done well with the purchase price for my first property, but this has made me consider it may not be such a good deal. Apparently, leasehold houses with these terms are very typical in Manchester and Liverpool, but still.....

    Any advice offered would be really, really appreciated!
Page 1
    • Ozzuk
    • By Ozzuk 12th Feb 18, 11:11 AM
    • 1,342 Posts
    • 1,966 Thanks
    Ozzuk
    • #2
    • 12th Feb 18, 11:11 AM
    • #2
    • 12th Feb 18, 11:11 AM
    The fact it is leasehold should have been factored into the value - assuming the estate agent knew. Otherwise its value is of course lower than an equivalent freehold property.

    Its not the end of the world, assuming it was valued correctly, but you need to know what restrictions if any are in place, and if those impact with any plans you may have (extensions for instance). You could also enquire about purchasing the lease post purchase.
    • G_M
    • By G_M 12th Feb 18, 11:15 AM
    • 44,391 Posts
    • 52,680 Thanks
    G_M
    • #3
    • 12th Feb 18, 11:15 AM
    • #3
    • 12th Feb 18, 11:15 AM
    As you've discovered, a peppercorn rent is a nominal rent. Back in the day, a peppercorn was literally paid each year (because a lease requires some payment). I imagine yours is £1, or £10 or something?

    If the 999 year lease was granted 10 days ago, then the outstanding length of the lease is now 998 years and 357 days.

    A sub lease means that the owner of the initial lease has created a 2nd lease beneath it.

    Imagine a big landlowner who splits up his land into 4 farms, and leases each one out to a separate farmer. One of those farmers finds his farm is too big to manage but finds a local resdent who wants a field to keep his horse in, so the farmer grants a sublease to the horse-owner.

    The horse owner has a perfectly valid and secure lease. The fact that it's a sub-lease makes no difference to him.

    Comparng a leasehold house to a freehold, the potential issues are

    * length of lease - no issue here
    * annual payments (ground rent, service charge) - no issue here
    * terms of the lease - there may be restrictions on what you can do eg build an extension. Read the lease!
    Last edited by G_M; 12-02-2018 at 11:18 AM.
    • davidmcn
    • By davidmcn 12th Feb 18, 11:15 AM
    • 7,809 Posts
    • 7,985 Thanks
    davidmcn
    • #4
    • 12th Feb 18, 11:15 AM
    • #4
    • 12th Feb 18, 11:15 AM
    If it's an ultra-long lease with no significant rent and no onerous restrictions in the lease, then for all practical purposes it's equivalent to freehold.
    • PhilE
    • By PhilE 12th Feb 18, 11:31 AM
    • 332 Posts
    • 211 Thanks
    PhilE
    • #5
    • 12th Feb 18, 11:31 AM
    • #5
    • 12th Feb 18, 11:31 AM
    If it's an ultra-long lease with no significant rent and no onerous restrictions in the lease, then for all practical purposes it's equivalent to freehold.
    Originally posted by davidmcn
    Its not freehold though, so he doesn't own it as such.

    OP, if you don't want leasehold don't buy it.
    • davidmcn
    • By davidmcn 12th Feb 18, 11:37 AM
    • 7,809 Posts
    • 7,985 Thanks
    davidmcn
    • #6
    • 12th Feb 18, 11:37 AM
    • #6
    • 12th Feb 18, 11:37 AM
    Its not freehold though, so he doesn't own it as such.
    Originally posted by PhilE
    So what do you think the downsides actually are, once you've eliminated the usual concerns of a short term, significant / increasing rent, restrictions on use / assignment etc? Many leaseholds are utterly benign, and will be valued as if they were freehold.
    • Smodlet
    • By Smodlet 12th Feb 18, 11:45 AM
    • 3,155 Posts
    • 6,261 Thanks
    Smodlet
    • #7
    • 12th Feb 18, 11:45 AM
    • #7
    • 12th Feb 18, 11:45 AM
    Are you certain the lease has 999 years minus 10 days to run, OP? I would want to see incontrovertible proof of that in writing and obtain a price for purchasing the freehold just to have the option.

    I would also sack the solicitor for failing in their duty to safeguard your interests. Being unable/unwilling to communicate what a peppercorn rent is when this falls within the realm of common knowledge is, imho, unacceptable.
    What is this life if, sweet wordsmith, we have no time to take the pith?
    Every stew starts with the first onion.
    I took it upon myself to investigate a trifle; it had custard, jelly, soggy sponge things...
    • N4Nikeir
    • By N4Nikeir 12th Feb 18, 11:48 AM
    • 3 Posts
    • 2 Thanks
    N4Nikeir
    • #8
    • 12th Feb 18, 11:48 AM
    • #8
    • 12th Feb 18, 11:48 AM
    OP here. The property has had a loft extension in the past, so I don't think there are serious issues with adding extras to the property. Looking over the lease now. Got it literally just after I posted, so going through it with an eye for anything odd. So far, I am "to pay the company 1 peppercorn, if demanded, on the 1st January every year." Interesting idea behind the idea of peppercorn rents....

    Decided to be cheeky and push to lower my offer, as I'm not happy about the way I had to find out it was leasehold.
    • AdrianC
    • By AdrianC 12th Feb 18, 11:50 AM
    • 17,582 Posts
    • 15,942 Thanks
    AdrianC
    • #9
    • 12th Feb 18, 11:50 AM
    • #9
    • 12th Feb 18, 11:50 AM
    ...and when I approached the estate agent responsible for selling the house, even she seemed surprised
    Originally posted by N4Nikeir
    The EA only goes by what their customer (the vendor) has told them. Verifying the vendor's information is your solicitor's job, and they're the only one that's working on YOUR side.

    (though she also said the length of the lease should not present a problem.)
    That's right.

    I have not asked him what he means by a "sub-lease" as opposed to a lease, or what is meant by "less than 10 days."
    The freeholder owns the ground.
    They have assigned a lease, presumably to a wider area than just your plot, to the holder of the head lease.
    They have assigned a sub-lease, for just your individual plot, to you.

    10 days would most likely mean that the lease has 998 years, 11 months, 21 days until expiry...

    It may not be a new build, but it certainly looks as if the lease has just been renewed.

    My solicitor, however, has been adamant that there is no chance of escalating ground rent, as this property is not a new-build, and so is not subject to an escalating rent review.
    A peppercorn rent is a peppercorn rent. Peppercorns themselves may be subject to pricing variations, but you can easily and cheaply invest in a long-range hedge against them.

    He also seems confident that this will not affect the value of the property (which I find a bit unbelievable.)
    Why?

    Thus, he is advising me to continue with the purchase, and my lender is also not concerned about the tenure of the property. I've spoken to my father about this, and he also seems confident about the purchase, particularly as my solicitor has said I should still continue. However, I'd really like some outside advice.
    You have three people who you trust, all with strong interests in giving you the correct information, saying one thing - and you are asking a bunch of total strangers who you don't know from Adam to gainsay them?
    • eddddy
    • By eddddy 12th Feb 18, 11:53 AM
    • 6,470 Posts
    • 6,358 Thanks
    eddddy
    You could probably buy the freehold (subject to some qualifying criteria) - in most cases, the law gives you the right to do so after 2 years (or sooner, if the seller cooperates).

    With a 999 year lease and peppercorn ground rent, the freehold should only cost a few hundred - but the legal fees might reach a couple of thousand. (Maybe adjust your offer to reflect this.)

    You could find out if other owners nearby have bought their freehold, and ask your solicitor whether your property would qualify for 'statutory enfranchisement'.

    See:
    https://www.lease-advice.org/faq/i-own-a-leasehold-house-how-do-i-buy-the-freehold/
    https://www.lease-advice.org/advice-guide/houses-qualification-valuation/
    • eddddy
    • By eddddy 12th Feb 18, 12:24 PM
    • 6,470 Posts
    • 6,358 Thanks
    eddddy
    OP here. The property has had a loft extension in the past, so I don't think there are serious issues with adding extras to the property.
    Originally posted by N4Nikeir
    Well... you (or more accurately your solicitor) should really check that the leaseholder received consent from the freeholder for this.

    However, this might open a huge can of worms...

    This is likely to trigger questions about building regs. Many freeholders will only give consent for alterations that meet building regs. Very many people do loft conversions that don't meet building regs.


    FWIW, out of courtesy, I might tell the EA/vendor in advance that I intended to make pre-contract enquiries about freeholder consent and building regs for the loft conversion - as this could cause big problems for the current leaseholder with the freeholder.
    • Davesnave
    • By Davesnave 12th Feb 18, 12:29 PM
    • 25,274 Posts
    • 92,992 Thanks
    Davesnave
    So what do you think the downsides actually are, once you've eliminated the usual concerns of a short term, significant / increasing rent, restrictions on use / assignment etc? Many leaseholds are utterly benign, and will be valued as if they were freehold.
    Originally posted by davidmcn
    Looking forward to the answer on this one!

    My first house was very similar, but I never came across the down-sides.

    Indeed it seemed a remarkably good buy, appreciating by >x6 over the 10 years I owned it.
    'It's a terrible thing to wait until you're ready…..Generally speaking, now is as good a time as any.' Hugh Lawrie.
    • davidmcn
    • By davidmcn 12th Feb 18, 12:30 PM
    • 7,809 Posts
    • 7,985 Thanks
    davidmcn
    Well... you (or more accurately your solicitor) should really check that the leaseholder received consent from the freeholder for this.
    Originally posted by eddddy
    First things first - does the lease even require consent to be obtained?
    • SensibleSarah
    • By SensibleSarah 12th Feb 18, 1:02 PM
    • 195 Posts
    • 259 Thanks
    SensibleSarah
    I had a similar situation when I bought my house. It only came out that it was leasehold and not freehold when I'd sunk all that I had spare into fees - and it had approx 970 years remaining. I decided to proceed with buying it and over 7 years on, I can't see a single way in which it has been different than if it were freehold.
    My local council are the freeholders. Not heard from them in relation to the house whatsoever (apart from me paying council tax, obviously) since I moved in.
    Peppercorn rent has been zero.
    Some houses in my street are leasehold and some are freehold, but the prices they sell for don't seem to be any different, so I don't think the value is really an issue in this case, with such a long lease and no chance of ground rent increase. Suppose I'll find out if I ever try to sell!

    My only slight concern is that due to my house not meeting the criteria for freehold, it will never be anything other than leasehold - but obviously, I'm not going to be around when the lease comes to an end!
    • Thrugelmir
    • By Thrugelmir 12th Feb 18, 1:22 PM
    • 58,891 Posts
    • 52,211 Thanks
    Thrugelmir
    My only slight concern is that due to my house not meeting the criteria for freehold, it will never be anything other than leasehold - but obviously, I'm not going to be around when the lease comes to an end!
    Originally posted by SensibleSarah
    Highly possible the house as it currently exists won't be around either.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • moneyistooshorttomention
    • By moneyistooshorttomention 12th Feb 18, 1:45 PM
    • 15,829 Posts
    • 43,837 Thanks
    moneyistooshorttomention
    I don't think I'd be that bothered about a "historical anomaly" situation - which is basically what a 900 odd years "lease" is. To all intents and purposes you are just a standard home-owner = end of....

    The problem arises if it's one of these modern-day "leasehold" situations - ie where the "lease" is for a much shorter period of time and the "freeholder" has the right to charge more than a peppercorn (or equivalent).

    You are in the first situation (ie its a normal situation from an historical anomaly) and not the second (ie someone hoping to make money from a house that you actually own - because of "technically" not owning it).

    First situation = you're an owner (in actual fact - if not technically speaking iyswim).
    Second situation = you've been turned into a sort of renter.
    How to make the worst decisions you'll ever make. Think "What would the ancestors do?" and (be you a person or a part of a country) you'll make a mistake every time.
    • D_M_E
    • By D_M_E 12th Feb 18, 4:28 PM
    • 1,551 Posts
    • 63,576 Thanks
    D_M_E
    As you have discovered, this sort of thing is common in Liverpool and Manchester.

    My uncle is currently buying his freehold in Liverpool - I believe he has around 800 years lease left at peppercorn ground rent - for about £450 plus solicitor's fees.
    • Mossfarr
    • By Mossfarr 12th Feb 18, 5:49 PM
    • 491 Posts
    • 684 Thanks
    Mossfarr
    I purchased an ex local authority house in 2010. It was leasehold - 987 years remaining on original 999 year lease. Peppercorn rent.
    The terms on the lease were that I needed to maintain the property, keep the inside in good order and redecorate at least every four years. I also needed to seek permission from the freeholder to make external changes such as building an extension or adding a porch or conservatory (a fee would be charged for this).
    I have never had to pay any ground rent - I would happily have given the local council a few peppercorns if they send a demand for them!
    In 2015 I decided to purchase the freehold. It cost £1548 in total including legal fees for both parties.
    It hasn't made the slightest bit of difference TBH, the valuation is still the same as the neighbouring leasehold properties but at least I don't have to seek permission to make changes. Also, i'm sure it will have more appeal when I come to sell it as so many scary stories are circulating about leases that some prospective buyers would possibly have been put off.
    • moneyistooshorttomention
    • By moneyistooshorttomention 12th Feb 18, 5:49 PM
    • 15,829 Posts
    • 43,837 Thanks
    moneyistooshorttomention
    As you have discovered, this sort of thing is common in Liverpool and Manchester.

    My uncle is currently buying his freehold in Liverpool - I believe he has around 800 years lease left at peppercorn ground rent - for about £450 plus solicitor's fees.
    Originally posted by D_M_E
    Which is what I'd do in your situation - as I would imagine it would be around the same sort of price. For the sake of around £1,000 all told it's not that big a deal.
    How to make the worst decisions you'll ever make. Think "What would the ancestors do?" and (be you a person or a part of a country) you'll make a mistake every time.
    • SouthLondonUser
    • By SouthLondonUser 12th Feb 18, 6:00 PM
    • 495 Posts
    • 67 Thanks
    SouthLondonUser
    I'd recommend the following:
    1. fire your solicitor. How can he be unable to explain peppercorn rent?
    2. understand whether the rent can be increased, when, how, by how much, subject to what, etc; especially should the freehold be sold to someone else
    3. understand if any kind of fee is due to the freeholder for insurance, for maintenance of the driveway, or what. The difference between a 999-year lease and a freehold is not the duration, but the fact that leaseholders often have no control if the fleeceholder decides to overcharge
    4. be absolutely sure that you won't need the freeholder's permission (which typically requires a fee) for extensions, changes to the windows, etc. Have you ever heard of the Dulwich Estate in South London? Google it. If you buy a freehold house in that area, they can fine you if they don't like how you keep your garden, you must ask for their permission for any changes (double glazing is a big no-no), etc. Yes, even if you own the freehold - it's not a typo.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,954Posts Today

8,472Users online

Martin's Twitter
  • We all knew we'd win in the end. Never in doubt! ....walks away whistling

  • Yeeesss. Phew. Wow. Uh. Oy yoy yoy

  • It's interesting that 80% of the crowd are young women... According to the close ups we keep seeing anyway.

  • Follow Martin