[Nigel]

Ay up brains of UKB 

I recently had to pay my ground rent on my leasehold 3 bed Sheffield terrace for the past 2 years as they had messed up getting my details when I bought. Costs me £2.50 a year so didn't break the bank! I believe (though still have to double check) my lease has approx 700 years left to run. While I was sorting that I asked what cost to purchase freehold would be. Answer was £250 plus their solicitor's costs of £400 plus any solicitor's costs on my side.

Question is - is it worth it?

The way I perceive it its only worth it if the resale value of the house goes up by more than the total outlay, anyone got any thoughts on this for similar properties? Also, is 100x annual ground rent / 12.5% of initial lease length a fair amount or should it be less? Cheers in advance.

[mark20]

Definately check how long is left on the lease. When I was going through the ball ache of buying my house, it turned out that the '700ish' year lease was actually 72 years!
But it seems really common that Sheffield houses have really long leaseholds, and it doesn't put off buyers, so I wouldn't bother if it's >500y

[kac]

Unless it's got potential to extend which might need freeholder permission its probably not worth it. It won't change the value of the house. The valuation is probably about right but no idea on legal fees. It's the cost of those that means most people don't bother.

[dave]

I'm amazed anyone makes any actual money from the leasehold thing. Whoever owns ours collects the rent through some agent or whoever who is obviously taking a cut, and then they send you a letter asking for £2.50 with a 50p stamp on it.

[tomtom]

MrsTT started getting these a few years back. Someone bought the rights to the ground rent or something. I told her to write five cheques for 50p - as it'll cost their business account 50p per cheque to cash. She didn't though

[dave]

I told her to write five cheques for 50p - as it'll cost their business account 50p per cheque to cash.

genius

[Nigel]

Cheers for the thoughts guys. I guess if it doesn't change the house value and lease is very long then its pointless buying it unless you've got money to burn. I can afford £2.50 / year ground rent for the rest of my life. Mark, fair one about checking the lease length for definite, I will certainly do that as I know that a friend had massive issues selling his house as leasehold was <70yrs and no mortgage lenders would lend to buyers, took him ages and some expense to buy freehold.

Principally I don't like the idea of lining a landlord's pocket, however like Dave I really can't see how £2.50 a year can be worth it for anyone!

I wonder whether legal costs could be reduced by getting everyone on the street to buy freehold at same time and aggregate costs?

[cofe]

We have a weird one where they try and sting us for extra if we don't take our buildings insurance through their preferred insurer. Is that even legal?

[shark]

We have a weird one where they try and sting us for extra if we don't take our buildings insurance through their preferred insurer. Is that even legal?

Sounds well dodgy if it is a traditional longstanding lease. A lease set up in more recent times might be different.

Contact: www.lease-advice.org/  Its a free advisory service.

[shark]

Cheers for the thoughts guys. I guess if it doesn't change the house value and lease is very long then its pointless buying it unless you've got money to burn.

It depends on the cost. I think they do add a little value to the house but that depends on the buyer. It makes the legals a bit simpler when you sell. You also dont have to worry about getting permission for modifications. My main motivation for buying it on my previous home was that I had gone ahead with an extension but not realised I needed to get permission and it seemed a cheap way of mitigating any comeback especially when selling.

[cofe]

We have a weird one where they try and sting us for extra if we don't take our buildings insurance through their preferred insurer. Is that even legal?

Sounds well dodgy if it is a traditional longstanding lease. A lease set up in more recent times might be different.

Contact: www.lease-advice.org/  Its a free advisory service.

Good link. Thanks Shark.

[SamT]

"My main motivation for buying it on my previous home was that I had gone ahead with an extension but not realised I needed to get permission and it seemed a cheap way of mitigating any comeback especially when selling."

This!

We've done various mods to the house, solar panels, velux etc all of which, when I read the small print of the lease, needed permission. 

Every year, our lease holders send us an letter offering to sell us the free hold. The price varies, sometimes they have an 'offer' at a reduced rate, something like 600 down from 800ish.
If they do this again, I may just bite the bullet and do it, as we do plan to do further work (knocking through walls etc) and its just peace of mind that there'll be no issued if we sell.

Has any ever heard of their house being 'inspected' randomly by the Free holder ??

[shark]

"My main motivation for buying it on my previous home was that I had gone ahead with an extension but not realised I needed to get permission and it seemed a cheap way of mitigating any comeback especially when selling."

This!

We've done various mods to the house, solar panels, velux etc all of which, when I read the small print of the lease, needed permission. 

Every year, our lease holders send us an letter offering to sell us the free hold. The price varies, sometimes they have an 'offer' at a reduced rate, something like 600 down from 800ish.
If they do this again, I may just bite the bullet and do it, as we do plan to do further work (knocking through walls etc) and its just peace of mind that there'll be no issued if we sell.

Has any ever heard of their house being 'inspected' randomly by the Free holder ??

No never. Its a kind of game of bluff. My impression talking to solicitors is that if they did charge for breaking the lease conditions they would have a struggle enforcing it through the legal system. If selling one way around things if a buyer is nervous is paying for an inexpensive indemnity insurance policy so that the purchasers have peace of mind in the unlikely event that the leaseholder take any action for a previous occupiers building work.

[Nigel]

Has any ever heard of their house being 'inspected' randomly by the Free holder ??

I think you would be well within your rights to tell them to take a running jump, especially wit regard to the inside. Its your house, not theirs. They own the land. I suspect these covenants are in to prevent householders making ludicrous changes of use e.g. internal gold mines etc. I reckon if your house is still a house there is very little they can or could be arsed doing.

[spidermonkey09]

Having grown up in the south east I was unfamiliar with the concept of leasehold houses when I started looking at buying. They are extremely common around Lancashire/NW and I guess Sheffield too, but I'd never heard of the concept on houses, only with flats, and it took a fair bit of convincing that it was normal before we went ahead with the purchase.

Since we moved in 2 years ago I've been keen to investigate buying the freehold. Partly out of a motivation to end this nonsensical feudal system and also to make the selling process simpler when we sell it, as there was a long holdup changing the leasehold title when we bought it which almost torpedoed the sale. After an extended game of cat and mouse with the freeholders solicitors I have finally obtained a price : £500 plus their legal costs of £500, plus my legal costs.

This is about what I thought it would be given our ground rent is minimal at £5 per annum and we have over 900 years left on our lease. My initial thought is that I am keen to get this done in the NY as I think it makes the house more attractive to buyers. Any other views on this? Nigel, did you go ahead in the end? Any knowledge on what ballpark legal costs are would be interesting too.

[stone]

We got a letter earlier this year from agents acting on behalf of our freeholder offering to sell the freehold for £1700 including all legal gubbins in the price. We phoned up the free government advice service for leaseholders and they couldn't really tell us anything other than we ought to get lawyers of our own to do it. We were loathe to pay for that so we took the risk that we were being scammed and just sent a cheque as asked by the freeholder's agents. It seems to have gone OK. The Land Registry sent us a letter saying they were processing it but had a backlog. Our local town Facebook page had posts saying others had done the same and eventually documentation came through from the Land Registry.

At the time I wondered whether the freeholders had sent out the letters thinking the new legislation would reform the system to such an extent that they wouldn't be able to get any money off of leaseholders anymore. But now that legislation has come out, my (ignorant) impression is that it ended up just preventing new build house leaseholds rather than changing things much for existing ones.

My impression from seeing local Facebook is that the (very large scale) freeholder here doesn't really get money by way of ground rent. Instead they get it by fees and late payment penalties and such like that apparently can often be successfully contested but are a huge nuisance apparently. They can only be communicated with by letter and generally seem to just lurk grimly creating a sense of unease  . If we have, as hoped, got rid of them, £1700  feels like a well spent extortion payment.

Although people say it's just a Northern thing, my late Grandmother's house in Bristol was also a leasehold. Her freeholder seemed very benign though and just collected a meaninglessly small ground rent for the 60 years she lived there.

edit, I quickly looked at the old posts above. The letter offering to sell the freehold also had a load of preamble saying they could inspect and evict us if we weren't maintaining boundaries or the house properly etc. A bit of a joke for something they got minimal ground rent for. I guess it was just to create a sense of menace to up the amount people would pay to get rid of them.

[Bradders]

Personally, without criticising anyone's decisions, I wouldn't touch a leasehold property with a barge pole, let alone spend my hard earned on one. Far too many horror stories especially when it's not like there aren't plenty of freeholds knocking about.

So yes SM I'd have thought it'd help increase your pool of potential buyers.

[stone]

I'm interested that people earlier in this thread seem to be saying that things such as penalty fees etc from a freeholder can just be ignored rather than going to the hassle of officially contesting them. My (probably unfounded) anxiety was that they might get onto some sort of widespread late-payment-credit-worthiness type register. I've heard that can happen if people ignore unwarranted parking fines from Parking Eye car-parks for example, causing real problems subsequently.

[petejh]

My instinct is you're being played. The scam isn't paying £2.50 or whatever miniscule annual payment. The scam is buying the freehold. A landlord may own hundreds if not thousands of these titles, purchased in bulk for a large initial outlay,  for the purpose of trying to convince some of the people to purchase their freehold by sowing a vague sense of unease. If these landlords can convince a few tens or hundreds of people per year to purchase a freehold for mid £000's or low £0000's then that's a very nice passive stream of income from their capital investment thank you very much. It's bullshit, and should have been got rid of a long time ago.

I could have it wrong and maybe it's worth doing. But that's my impression.

[spidermonkey09]

Personally, without criticising anyone's decisions, I wouldn't touch a leasehold property with a barge pole, let alone spend my hard earned on one. Far too many horror stories especially when it's not like there aren't plenty of freeholds knocking about.

So yes SM I'd have thought it'd help increase your pool of potential buyers.

That was my perspective before I moved to the NW, but you'd be hugely limiting yourself if you didn't consider leasehold properties here. It does seem to be very localised and very normal. No one bat's an eyelid at it but if you aren't au fait with them they sound like a huge and needless risk. In practice I think the risk is very low but I would definitely try and avoid future houses being leasehold so there must be a cohort of buyers who think likewise.

Interesting thoughts Pete. It has occurred to me to try and negotiate with the solicitor a bit but ultimately even if successful I will only save 100 or so on the cost of the freehold, and the expense of the legal fees will remain.

[stone]

Pete, I totally agree that it's bullshit but to me that is a seperate issue to whether it makes sense to just pay up and get rid.

We knowingly bought our house as a leasehold so I sort of think we knew what we were doing but I had hoped our freeholder would be more like my Grandmother's was.

[petejh]

I'd say that whether or not it makes sense to purchase a freehold depends on the individual circumstances of the freehold. In the properties talked about on this thread - often terraced houses in the NW/Yorkshire built in the late 1800's to early 1900's, with a 999-year leasehold, then it probably doesn't make much economic sense to purchase the freehold - because the rent is tiny and the real-world constrictions on property-owners appear similarly tiny. But it might make a lot of sense emotionally to purchase the freehold. Property famously an emotional asset as much as financial.
The business model for freeholders in these type of old properties appears to be: buy up packages of 999-year freeholds in massive scale, try to sell some of the freeholds to generate income. In some cases try to make some margin on offering insurance/legal products by striking up finder's deal with insurance/legal companies. Also any leaseholds approaching the point of 60-70 years remaining on the leasehold would be worth more to an investor, as they can make money by offering extensions (for a very fair price...). A different beast from the notorious modern apartments/house-builder's leasehold scams.

If you can stomach reading it, the investment model for buying freeholds partly explained here  : https://www.propertyhawk.co.uk/magazines/investing-in-ground-rents/#:~:text=The%20freeholder%20retains%20the%20ownership,the%20system%20of%20Common%20Law.

[stone]

Basically what you are paying for is the "marriage value" ie the difference in value of a freehold for the leaseholder versus anyone else. That marriage value is maximised by the freeholder being as awkward and menacing as possible. It is the fiduciary duty of agents acting for the freeholder to be as awkward and menacing to the leaseholders as they can within the law, which is on their side.

In some cases (such as my Grandmother's  freeholder) they are just dozy/kind and don't squeeze what they could. But such freeholders can and do sell up to more ruthless/go-getting freeholders.

[kac]

That's not quite right Stone. You only get any kind of quantifiable marriage value on leaseholds with less than 80yrs to run. You seem to be describing an emotive value. Out of curiosity what is your term and ground rent? You can also get restrictive terms in freeholds. Mine is and it includes the clause that you have to ask the builder before making any changes to the building . I believe the vendor had to get an indemnity policy when I bought it. My solicitor said that it's best to not even ask as if you do ask and they refuse the indemnity policies costs more. Compared to the difficulty of finding a house in the western suburbs of Sheffield in a sellers market it's a pretty low worry - I'm guessing bradders has never had this pleasure!

[stone]

Something is worth what people will pay for it. If the freeholder develops a local reputation (as they have here) of springing on people penalty demands etc then people (including us) pay up a marriage value concocted by that menace. Another source of marriage value is the (rational or otherwise) reluctance future buyers have for leasehold houses.

[Potash]

My instinct is you're being played. The scam isn't paying £2.50 or whatever miniscule annual payment. The scam is buying the freehold.

I was once offered the freehold on a house with peppercorn rent for a few hundred pounds. Using some of my long since forgotten business studies skills I worked out the present value of the freehold and concluded it was a scam and a massive rip off.

[kac]

Don't disagree Stone and completely understand your position. Your just misusing the term though - I do sometimes have to value these things!

[sxrxg]

I looked into this a few years ago being in the Northwest and having a leasehold property. I also decided it was not worth purchasing the freehold. The lease had 950 years left to run when purchasing the house and the land is owned by the church, current ground rent is £7.50 per annum and speaking to neighbours here no one has purchased the freehold and don't see any need to. Sure this might be different though depending upon the situation and owner of the land.

[spidermonkey09]

My instinct is you're being played. The scam isn't paying £2.50 or whatever miniscule annual payment. The scam is buying the freehold.

I was once offered the freehold on a house with peppercorn rent for a few hundred pounds. Using some of my long since forgotten business studies skills I worked out the present value of the freehold and concluded it was a scam and a massive rip off.

This what I'm finding hard to work out. All the online calculators aren't set up for leasehold houses in the NW, only flats in London. If you're aware of any good resources let me know!

[stone]

You could look at by thinking I could buy 50year government bonds for £200 and roll them over every so often and the coupons would easily pay the ground rent, so it is dumb to pay £1700. But the whole point is the ground rent is neither here nor there. It isn't the ground rent liability that makes people wary of leasehold house ownership; it is all the hassle and bullshit with weird opaque menacing letters from people you can't contact etc.

If you are in the lucky situation such as my grandmother was, where it really is just a straightforward ground rent liability, then I agree the only reason to pay more than a couple of 100 pounds would be if you (or potential future house buyers) thought that might change.

[spidermonkey09]

Yeah, to be clear there are no issues with the freeholder currently; a request for £5 per annum arrives from their solicitor every September and there were no hugely onerous covenants on the leasehold. Its more my own (possibly totally wrong_ perception that this system is bullshit and it might be better to get shot of it, even if it results in me overpaying, as it might make potential buyers feel better about the house in the future. But obviously this is unquantifiable.

[kac]

The online calculators are set up to calculate marriage value. There's isn't any marriage value is a lease with hundreds of years left. From what you have said it's worth about 50 times the ground rent. Anything above that is a premium your paying for peace of mind. Whether it is worth it is a very personal decision based upon how worried you are about not owning the freehold. Possibly the situation like Stone has described will become more common as historically they have been owned by the landed gentry/churches etc. Awful as the system is their agents will usually be pretty reasonable. As more get sold it tends to be pretty nasty specialist companies who will buy them as they are the ones who can make the most money out of them.

[stone]

spidermonkey09, if you bought yours now, then at least your money would be going to people who sound relatively decent. So you wouldn't be rewarding grimness as we were.

[shark]

It has long been recognised that there has been abuse by leaseholders with their charges and legislative reform of leases in the pipeline for some time that will include the abolishment of at least some ground rents info - here

I think it is worth considering buying out leases and have done so a couple of times when the quoted price is not stupid. It takes out a step in the conveyancing process when you sell and the hassle of paying the ground rent. You are also meant to request permission from a leaseholder for house extensions. 

[mrjonathanr]

FWIW, when we bought our house, I didn’t look at any property that wasn’t freehold, just struck leaseholds off the list straightaway.

[stone]

kac, you've got professional knowledge of all of this so I realise I'm almost certainly in the wrong but I just googled and it still isn't obvious to me that I was misusing the term "marriage value". This site seems to be saying it has two meanings, either lease extension or enfranchisement value. I guess I was using it with that second meaning whilst you were using the firsat meaning:-

marriage value is the increase in the value of the property following enfranchisement or a lease extension. This reflects the added market value of a longer lease or the freehold. [quote/]
https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

[kac]

If you are using the term correctly and  you think you are paying marriage value I'm going to assume your lease term is under 80yrs as marriage value should be excluded from leases with more than 80yrs to run. Happy to discuss when I next see you at the tor!

[Tony]

The facts of the matter regarding leasehold houses would appear to be:

Leasehold (especially if the freeholder is obstructive) can increase the conveyancing period

If you’ve broken the terms of your lease, the freeholder, if they become aware, may be more obstructive towards the sale.

Freeholders are very unlikely to ever check on your compliance with the lease (because it’s likely unenforceable in reality - and expensive [for everyone] to try).

Leasehold properties are unattractive to some buyers (but less likely to be so to buyers from the same areas in which leasehold houses are prevalent). I have seen a figure that leasehold properties sell for 1% less than the equivalent freehold property - on average - but I’m doubtful of their calculations and I don’t think I saw a reference to time period. (I would imagine the % difference would asymptote toward 0 as houses get more expensive.)

The Gov’s proposed legislation may make it less attractive to be a leaseholder, but the proposed Bill was rather watered-down and - even if it passes through Parliament before Rishi goes to the polls - is unlikely to take effect for some year yet.

Leasehold is a ridiculous system that the Scottish Gov did away with years ago but somehow it’s too challenging for Westminster…

[petejh]

It has long been recognised that there has been abuse by leaseholders with their charges and legislative reform of leases in the pipeline for some time that will include the abolishment of at least some ground rents info - here

Such a messed-up system though. The approach taken is 'we're going to make it easier for homeowners to purchase something (historic leaseholds) which in a modern society shouldn't exist; or at the least something which should have no re-sale value and therefore should not be worth anyone considering purchasing'.

The better approach imo would be to legislate historic leaseholds out of existence which would look like a government 'stealing' ownership of private property from land owners/companies/church. If that isn't possible due to optics or the unintended consequences of abolishing arcane ownership laws - then introduce legislation to reduce the re-sale value of historic leaseholds to zero, or a default £1. The re-sale value of historic leaseholds seems to stem from an owner of lease  potentially having authority to be a PITA to the owner of a building that sits on land being leased. Take away any real-world authority whatsoever from the owner of the lease by laws which prevent them being able to act, and make this clear to everybody, and the value of historic leaseholds mostly disappears along with the appeal of them as an investment to predatory leasehold investment companies.