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Buying Freehold (Read 6231 times)

Potash

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#25 Re: Buying Freehold
December 22, 2023, 10:04:50 am
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

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#26 Re: Buying Freehold
December 22, 2023, 10:09:45 am
Don't disagree Stone and completely understand your position. Your just misusing the term though - I do sometimes have to value these things!

sxrxg

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#27 Re: Buying Freehold
December 22, 2023, 10:33:53 am
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

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#28 Re: Buying Freehold
December 22, 2023, 11:22:56 am
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

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#29 Re: Buying Freehold
December 22, 2023, 11:33:45 am
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

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#30 Re: Buying Freehold
December 22, 2023, 11:41:29 am
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

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#31 Re: Buying Freehold
December 22, 2023, 01:29:06 pm
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

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#32 Re: Buying Freehold
December 22, 2023, 04:10:28 pm
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

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#33 Re: Buying Freehold
December 22, 2023, 05:51:49 pm
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

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#34 Re: Buying Freehold
December 22, 2023, 08:28:05 pm
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

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#35 Re: Buying Freehold
December 22, 2023, 10:02:33 pm
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:-

Quote
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

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#36 Re: Buying Freehold
December 23, 2023, 09:32:16 am
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 S

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#37 Re: Buying Freehold
December 23, 2023, 09:49:37 am
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…

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#38 Re: Buying Freehold
December 23, 2023, 10:27:59 am
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.

 

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