New Build leasehold experiences

New Build leasehold experiences

Author
Discussion

55palfers

5,893 posts

163 months

Tuesday 7th February 2017
quotequote all
Put a clause in your contract to ensure you are given first refusal on any sale of your freehold and insert an agreed multiple of ground rent.

Otherwise, walk.

Tom_C76

1,923 posts

187 months

Tuesday 7th February 2017
quotequote all
Bear in mind that the LH aspect at the point of sale shouldn't be a problem on 999 year leases. Mortgage companies get twitchy with less than 70 years remaining...

I suspect this way of selling has come about as the LAs are making life very hard for any developer trying to get roads adopted. If the whole site remains LH then it's easier for the roads to stay private. If you do buy your freehold on one of these sites you'll remain liable for the maintenance charges that cover any private roads, parks etc that don't get adopted.

Fastpedeller

3,848 posts

145 months

Tuesday 7th February 2017
quotequote all
55palfers said:
Put a clause in your contract to ensure you are given first refusal on any sale of your freehold and insert an agreed multiple of ground rent.

Otherwise, walk.
Ground rents aren't generally a problem - BUT Maintenance charges are the ones you want pegged with an agreed max increase (I doubt you'll achieve that)

Steve Evil

10,653 posts

228 months

Saturday 11th February 2017
quotequote all
Would welcome some knowledge on this subject, we've found a house locally that we both love, builder is Charles Church and it's leasehold, which after reading the stories about it has us both concerned. They've said the ground rent starts at £150 and rises with RPI every ten years.

I know the two responses I'll get are:

A. Don't buy a Persimmon house.
B. Don't buy a leasehold house.

So taking that onboard, what I want to know is:

1. We were told we can buy the freehold after 2 years, some research suggests we need to have been living in the house for 2 years before we are eligible to do that.
2. After those 2 years, do they have to offer is the chance to do that before they can sell off the overall ownership? Or can they sell the head lease (not entirely sure what that is if I'm honest).
3. If the head lease is taken over by another company can they then raise the ground rent on demand? I know they can charge what they like for you to buy the freehold at that point which is where the horror stories come in, hence my question earlier to see if we get offered the chance to buy it before they can sell it off.

Hopefully someone who has been through it with Persimmon or knows the technicalities better than I, can chip in and make things a little clearer.

Fastpedeller

3,848 posts

145 months

Saturday 11th February 2017
quotequote all
Steve Evil said:
Would welcome some knowledge on this subject, we've found a house locally that we both love, builder is Charles Church and it's leasehold, which after reading the stories about it has us both concerned. They've said the ground rent starts at £150 and rises with RPI every ten years.

I know the two responses I'll get are:

A. Don't buy a Persimmon house.
B. Don't buy a leasehold house.

So taking that onboard, what I want to know is:

1. We were told we can buy the freehold after 2 years, some research suggests we need to have been living in the house for 2 years before we are eligible to do that.
2. After those 2 years, do they have to offer is the chance to do that before they can sell off the overall ownership? Or can they sell the head lease (not entirely sure what that is if I'm honest).
3. If the head lease is taken over by another company can they then raise the ground rent on demand? I know they can charge what they like for you to buy the freehold at that point which is where the horror stories come in, hence my question earlier to see if we get offered the chance to buy it before they can sell it off.

Hopefully someone who has been through it with Persimmon or knows the technicalities better than I, can chip in and make things a little clearer.
Be more concerned about rising service charges than ground rent - And of course the leasehold purchase issue. I'd never consider leasehold again, having had a leasehold flat in 90's.

C Lee Farquar

4,066 posts

215 months

Saturday 11th February 2017
quotequote all
Leasehold flats and houses are significantly different. Freehold flats are difficult to come by and problematic.

With these new homes sales I don't see why you can't insist they sell you the house freehold from day one.

anonymous-user

53 months

Saturday 11th February 2017
quotequote all
C Lee Farquar said:
With these new homes sales I don't see why you can't insist they sell you the house freehold from day one.
Who from ? From what it seems/I gather from recent news reports on the growing leashold/freehold "scam" plenty of builders don't actually own the land they are building houses on.

Fastpedeller

3,848 posts

145 months

Saturday 11th February 2017
quotequote all
speedyguy said:
C Lee Farquar said:
With these new homes sales I don't see why you can't insist they sell you the house freehold from day one.
Who from ? From what it seems/I gather from recent news reports on the growing leashold/freehold "scam" plenty of builders don't actually own the land they are building houses on.
So don't buy a leasehold house and the practice will soon cease once the developers can't sell the houses!

anonymous-user

53 months

Sunday 12th February 2017
quotequote all
Fastpedeller said:
speedyguy said:
C Lee Farquar said:
With these new homes sales I don't see why you can't insist they sell you the house freehold from day one.
Who from ? From what it seems/I gather from recent news reports on the growing leashold/freehold "scam" plenty of builders don't actually own the land they are building houses on.
So don't buy a leasehold house and the practice will soon cease once the developers can't sell the houses!
Yup agreed completely, Taylor wimpey reckoned they had stopped selling leasehold property on news reports but I'd take that with a large pinch of salt.
'Interesting' article about the practice
https://www.google.co.uk/amp/s/amp.theguardian.com... almost as slimy in the language as politicians and 'lawyers'

Sharted

2,615 posts

142 months

Sunday 12th February 2017
quotequote all
Just for info:

Should you have a mortgage and fail to pay ground rent or service charge the freeholder/management company may be able to add the missed payments to your mortgage balance.

This is how it was when I last looked.

sawman

4,915 posts

229 months

Sunday 12th February 2017
quotequote all
If I take the option of buying the freehold from the get go, that should protect me from that aspect, but is it likely that I can do anything to get a clear picture regards communal sevice charge increase before i sign up or is that only something that a solicitor will uncover from deep in the contract?

Fastpedeller

3,848 posts

145 months

Sunday 12th February 2017
quotequote all
sawman said:
If I take the option of buying the freehold from the get go, that should protect me from that aspect, but is it likely that I can do anything to get a clear picture regards communal sevice charge increase before i sign up or is that only something that a solicitor will uncover from deep in the contract?
Your solicitor will say "they are a reputable company" or other such garbage as he won't want you backing out. There is NO WAY to stop these rising if they wish them to, apart from a joint legal action which will give you 2 problems 1)If you withold any payments the Mortgage co will just pay them on request from the managing agent and threaten you with action and 2)If you ever try to sell the question of the legals will come up and you won't be able to. Been there done it. DO NOT BUY A LEASEHOLD if you value your sanity and pocket.

joe oliver

33 posts

156 months

Sunday 12th February 2017
quotequote all
Just to briefly add my experience - I bought a Taylor Wimpey flat in 2010, ground rent was £200 / year at the time (125 year lease).

About a year down the line I had a letter from TW stating the freehold had been sold to a 3rd party, so read my lease carefully and it became apparent that this figure of £200 DOUBLED every 10 years for the first 50 years, starting from when the site first started being developed (2008).

Safe to say I put it up for sale as soon as I could and when it eventually sold it was for circa 20% less than I paid just to get rid of it.

During the selling process I even had to pay the Freeholders agent £150 fee for a statement confirming I wasn't in ground rent in arrears!

This is before you consider the service charges which can be whatever they want to charge and include all their overheads, etc.

I will never touch leasehold ever again and advise everyone who asks as such.

Fastpedeller

3,848 posts

145 months

Sunday 12th February 2017
quotequote all
As above, from mine and Joe's experience if anyone buys a leasehold then they must be mad!

anonymous-user

53 months

Sunday 12th February 2017
quotequote all
I was in the process of buying a new build semi from persimmon on 999 year lease and pulled out just before completion last December because of the horror stories of unsaleable homes. Solicitor only said risk applied to me after I pointed out the article!

C Lee Farquar

4,066 posts

215 months

Sunday 12th February 2017
quotequote all
Fastpedeller said:
As above, from mine and Joe's experience if anyone buys a leasehold then they must be mad!
Seems to me it's madness to take a 20% equity hit to 'save' paying an extra £200 a year until 2028.

For balance I've had a BTL flat for nearly 20 years and have no issues with it being leasehold. I assume one or two people in London get by with leasehold flats too?

This is a different situation to the sharp practice Developers are trying with houses.

grantone

640 posts

172 months

Sunday 12th February 2017
quotequote all
If it's a house with just leasehold/ground rent and not anything with a service charge, then from what I have seen at property auctions near me long leaseholds in bulk sell for about a 2% to 3% gross yield.

So if your ground rent is £100 pa and >100 years on lease I would expect that after a little haggling you would pay max around (£100 / 2%) = £5000 plus fees. Not a bad investment with such low interest rates and while it might not immediately add that value back to the house, you can see from how many people on this thread would ignore leasehold houses it may pay most of the capital back with being able to sell to a wider market.

The horror stories (ignoring service charges) are mainly where the lease has been left to run until the short term (<80 years) makes mortgage lenders refuse to lend so the value without the lease extension falls through the floor as it can only be sold to cash buyers.

Steve Evil

10,653 posts

228 months

Sunday 12th February 2017
quotequote all
Been to a few other local sites today and the leasehold thing seems pretty commonplace, as does the service charge of around £100pa. Reading up on it, if the maintenance company are doing a crap job and charging a fortune you club together with the other residents and give them the boot.

anonymous-user

53 months

Sunday 12th February 2017
quotequote all
grantone said:
The horror stories (ignoring service charges) are mainly where the lease has been left to run until the short term (<80 years) makes mortgage lenders refuse to lend so the value without the lease extension falls through the floor as it can only be sold to cash buyers.
This is a new horror story. Developers are making houses leasehold, doubling ground rents every 10 years to make the freehold more appealing and then selling that freehold onto private equity companies for 100's of thousands.

In the meantime the buyer of the new build is told that the house is leasehold so that the builder can continue to manage the site and the buyer is able to purchase the freehold in 3-4 years for 'only' several thousand pounds. But - when the site is built the freehold gets sold to the private equity company (homeowners aren't notified at the time) who won't sell the freehold to the home owner at reasonable cost.

The home owner then wants to sell the house but can't because astute solicitors warn potential buyers off with the ground rent increases, inability to purchase freehold and the potential of not obtaining a competitive mortgage. The house then becomes unsaleable.

National papers have contacted house builders like Permission and Taylor Wimpey about this and their response is along the lines of not our problem as we're no longer the freeholder!

There is something in the latest Government White Paper to stop this practice but it will take time and I doubt it will apply retrospectively to buyers who fell into the trap.

It's a greedy practice and I'm sure we'll be hearing about a lot more people screwed over by it in the coming years.

Fastpedeller

3,848 posts

145 months

Sunday 12th February 2017
quotequote all
C Lee Farquar said:
Fastpedeller said:
As above, from mine and Joe's experience if anyone buys a leasehold then they must be mad!
Seems to me it's madness to take a 20% equity hit to 'save' paying an extra £200 a year until 2028.

For balance I've had a BTL flat for nearly 20 years and have no issues with it being leasehold. I assume one or two people in London get by with leasehold flats too?

This is a different situation to the sharp practice Developers are trying with houses.
Anyone who doesn't want to heed the horror stories will pay the price later. Be my guest, I've tried my best. I guess we'll see your horror stories and requests for help in a few years on PH? It's easy to get excited about our first house, we've all done it. As a first time buyer you're in an ideal bargaining position which you'll probably never be in again - now is the time to step back and let your head (rather than your heart) lead you.