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Thread: Freehold v Leasehold

  1. #1
    Senior Member Lighttouch's Avatar
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    Freehold v Leasehold

    Normally flats are leasehold but there's a new trend by developers to sell houses 'leasehold' and not freehold/

    Why. Well, if you were a first time buyer and you took out a 'help to buy' mortgage to save money you would be in for a shock when you tried to sell it as a leasehold house.

    Developers charge ground rent of say £200 a year for a home. In order for you to sell it you need to buy the freehold off the developer.

    Developers will sell you the freehold but at a cost - 20 times the ground rent - or in this example at a cost of £4,000.

    So, just warn people to watch out for this unnecessary 'stealth tax' that some developers can squeeze out of home buyers.

  2. #2
    Senior Member nukecad's Avatar
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    Houses have always been sold leashold (as well as freehold), usually with a long lease but it's something to watch when buying.

    You can sell a leasehold house without buying the freehold, but the freeholder usually has to agree to the sale and must have 'reasonable grounds' not to agree.
    This can cause a problem if you can't find who the freeholder is, see below.

    If/when you apply for a mortgage the mortgage company certainly looks at how long the lease is for and won't lend if there is less than 55 or 60 years left to run.

    When I bought my first house it was about 60 years old and had 930+ years left to run of a 999 year lease, the ground rent was £20/year but was never demanded.
    (Technically I suppose I still owe it for the 15 years or so that I had the house).

    Often with older properties the freeholder has gone out of business, or even died, and so the ground rent never gets asked for, and nobody is actually sure who holds the freehold anymore. (Which can cause problems in itself).

    Some newer builds (since the 80's) were sold with only a 99 year lease and this can be a big problem when it comes to resell.

    You do have a right to get a lease extended but it can be a complicated process.
    http://www.yourmoney.com/mortgages/b...-need-to-know/
    Last edited by nukecad; 27-01-17 at 15:32.
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  3. #3
    Senior Member Lighttouch's Avatar
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    New leasehold flats usually start with a total leasehold life of 999 years. If a person buys the flat they will be given a chunk i.e. a 99 year lease and when they move on the next over will be offered another 99 years out of the 900 years left if they are a second buyer.

    A new trend by some developers is designed specifically to milk more money out of a home when they plan to sell but can't as no-body wants to buy a leasehold house.
    Last edited by Lighttouch; 28-01-17 at 19:26.

  4. #4
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    I'm in N.Ireland and most homes are leasehold with ground rent normally a nominal fee ours is £30/year our house was built in the 80's. Our first house was an old terrace and our solicitor rabbited on about it being freehold, which was good, was a bit lost on us apparently if it's freehold you can be buried in your garden as long as it's notified on the deeds ! I've never heard of anyone being forced to buy the freehold. I am aware you can't get get a mortgage on a house with aa short leasehold.

  5. #5
    I personally wouldn't be happy in a house leasehold, I think it just makes life easier if freehold

  6. #6
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    We have a family member currently facing this issues.

    Should they buy a teeny house, mortgaging themselves to capacity but have the peace of mind of it being freehold with no extra ongoing costs bar normal house maintenance, or buy a flat which is a bit cheaper but face paying at least £1200-£1500 per a year service charges, plus a ground rent of a couple of hundred per year.

    Fortunately the area they are buying in, the flats mainly have 999 year leases, which is not the case where we live.

    They have also come across the issue that Lighttouch has mentioned of brand spanking new houses and flats being leasehold and have service charges of £1100+ on newly built properties. These are being avoided.

  7. #7
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    My first place was a small house in a block, and was on a lease. The service charge basically paid for a shared buildings insurance policy.

    You can get stung because there is no limit to the service charge. If the roof needs replacing, the costs gets split between everybody. If any of the other residents claim that modifications are needed to the structure (such as new windows) they can demand that the cost gets split as well - but usually it is done by agreement.

    If an older house is split into flats then either the bottom flat owns the freehold for the rest, or sometimes the developer creates a limited company and all of the residents are equal shareholders.

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