Leasehold purchase query?

[AL5026]

We live in a Victorian house and we’ve been given the opportunity to purchase the leasehold. I expected the invite to do this would arrive as the company that owns them have been auctioning off batches of leases in our area in recent months. The lease itself is a 1000 year term for £4 a year with no option within the lease for an increase. It dates back to, iirc, either the late 1930’s or early 1940’s.
The initial offering is £1000 for the leasehold and a £450 charge for legal fees. That seems opportunistic on their part? I’m inclined to counter offer £500 for the leasehold but regardless, I’m really interested in knowing if it’s worth doing in the first instance? Are there any pitfalls to avoid if we go ahead? TIA.

[Countdown]

I don't think it's worth doing.

The company that owns the freehold on my house currently only invoices every 6 years because otherwise the cost of billing would be greater than the income. I think at some point in the next 100 years (possibly sooner depending on inflation) ground rents are going to be worthless.

[98elise]

AL5026 said:

We live in a Victorian house and we’ve been given the opportunity to purchase the leasehold. I expected the invite to do this would arrive as the company that owns them have been auctioning off batches of leases in our area in recent months. The lease itself is a 1000 year term for £4 a year with no option within the lease for an increase. It dates back to, iirc, either the late 1930’s or early 1940’s.
The initial offering is £1000 for the leasehold and a £450 charge for legal fees. That seems opportunistic on their part? I’m inclined to counter offer £500 for the leasehold but regardless, I’m really interested in knowing if it’s worth doing in the first instance? Are there any pitfalls to avoid if we go ahead? TIA.

I would normally say buy the lease just because it's harder to sell a leashold property, but 1000 years at £4 a year makes the lease virtually worthless.

[trevalvole]

Something on here may help: https://www.lease-advice.org/topics/

[Car_driver]

I would agree that it's not worth doing. It is a house, not a flat. The ground rent is "peppercorn" and I am 99% certain that the lease does not have any relevant restrictive covenants (ie. The lease does not say that you must have the freeholder's permission to decorate/have a pet/build an extension). These types of leases are common for old properties and buying the freehold will not add any value to the house. I would throw away the letter and forget about it (my parents live in a house with such a lease, hence my suggestion).
If we were talking about a flat or a leasehold house on a recently built estate, then it would be a different matter.

[AL5026]

Thanks for the responses. I’ve pretty much come to the conclusion that it isn’t worth buying it. There are no restrictive covenants and there isn’t any detriment to the house value. I’d just be spending the money for no benefit. Think I’ll put the £2k towards a new road bike instead!

[matjk]

To add another view point , I lived in a lease hold flat and if wasn’t the best experience, I vowed I would never touch another lease hold property only free hold. A lot of people (right or wrong) are of the same mindset. I know it makes no real difference and this type of lease is completely different from the one I had, but still If I was buying I’d want free hold, so it might add some value to some people , or make it slightly more desirable. If you can get it cheap enough I’d just do it so I actually owned the land .

[Jeremy-75qq8]

I assume you mean buying the freehold. Buy it. It is peanuts money and the market for a leasehold house is far smaller than for a freehold.

[Countdown]

Jeremy-75qq8 said:

I assume you mean buying the freehold. Buy it. It is peanuts money and the market for a leasehold house is far smaller than for a freehold.

Where it’s a peppercorn rent it makes no difference.

[Tango13]

My main concern would be the people that own the lease selling it on to somebody else. Also would you need their consent if you came to sell the property?

Peppercorn rent or not I'd buy it for peace of mind.

[elanfan]

The leaseholders are taking the piss. They’re asking the equivalent of 250 years ground rent what a laugh. The legal fees are extortionate too, if they’re selling off a portfolio of leases all the documentation will be available on computer. Change the address etc and it’s probably no more than 15 mins work.

I’d offer them £200 for the lease and another £200 for fees. If not tell them to shove it.

[Fastpedeller]

matjk said:

To add another view point , I lived in a lease hold flat and if wasn’t the best experience, I vowed I would never touch another lease hold property only free hold. A lot of people (right or wrong) are of the same mindset. I know it makes no real difference and this type of lease is completely different from the one I had, but still If I was buying I’d want free hold, so it might add some value to some people , or make it slightly more desirable. If you can get it cheap enough I’d just do it so I actually owned the land .

I had a leasehold flat - the worst decision I ever made. After that experience, I wouldn't buy any property with eg a shared area/driveway. I appreciate drains (or at least parts of them) are shared and I'd avoid those wherever possible as well. Once bitten, twice shy!

[Gareth79]

Countdown said:

Jeremy-75qq8 said:

I assume you mean buying the freehold. Buy it. It is peanuts money and the market for a leasehold house is far smaller than for a freehold.

Where it’s a peppercorn rent it makes no difference.

Is that universally understood though? The negative press regarding leasehold properties might have an impact in just putting off buyers regardless.

Another thing - presumably there are fees to be paid and paperwork to be done when selling the house to transfer the lease? It might save hassle to you and the buyer when you come to sell.

[Sir Bagalot]

I assume you mean a share of the freehold.

So you could buy it for £1,450

If you don't it gets auctioned off. Who could buy it? A company that likes charging management fees and adds 50% to every bill

Certainly make a counter offer, but my advice is to buy

[AL5026]

Thanks for all the advice. It is my understanding that no changes can ever be made to this lease without our agreement. Therefore an alternate purchaser would not be able to suddenly change it to our detriment. It’s seems to be very common in our area and again, has no impact on the house values. We can maintain the status quo knowing that we can do to the house what we choose to do without any covenants requiring permission to do so. And it’s £4 a year, not quite forever but with over 900 years remaining so an issue won’t arise for us, our offspring and theirs and so on.
I do think it’s expensive for what it is and half of me wants to see it likely go to auction in coming months with a batch of others and see if the purchaser also makes an approach to sell it and go from there.
The cost to buy it right now in the general scheme of things is not an issue other than I’m a tight Yorkshire ex pat and don’t see the value that they’ve attached to it!

[Countdown]

Sir Bagalot said:

I assume you mean a share of the freehold.

So you could buy it for £1,450

If you don't it gets auctioned off. Who could buy it? A company that likes charging management fees and adds 50% to every bill

Certainly make a counter offer, but my advice is to buy

I might be wrong but it sounds like a "Ground rent" type of lease. They're very common "Up north" and they are very different to the types of leases you get on flats and on new-builds. All the ones I've seen have charges of less than £6 a year and in some cases the charge is less than the cost of postage incurred by the freeholder in sending out the invoice. There are (IME) absolutely no restrictions imposed by the leases and even if somebody else buys the Lease they can't increase the charge. Some of them try to whack on a £50 admin fee but they really shouldn't be doing that and you can normally get it waived by quoting the Landlord and Tenant Act.

I'm reasonably confident that the ownders of the freeholds will stop collecting the rents due to inflation.

[Countdown]

Gareth79 said:

Countdown said:

Jeremy-75qq8 said:

I assume you mean buying the freehold. Buy it. It is peanuts money and the market for a leasehold house is far smaller than for a freehold.

Where it’s a peppercorn rent it makes no difference.

Is that universally understood though? The negative press regarding leasehold properties might have an impact in just putting off buyers regardless.

Your Solicitor should explain it to you when you buy. I remember my first purchase back in the 90's and our Solicitor explained what Ground Rent was.

Gareth79 said:

Another thing - presumably there are fees to be paid and paperwork to be done when selling the house to transfer the lease? It might save hassle to you and the buyer when you come to sell.

That's a fair point and to be honest i think it depends on how scammy your Conveyancer is. I've bought/sold quite a few BTLs and our Solicitor has never made a big issue out of it. Maybe he automatically assumes the properties have ground rents and builds the cost into the original quote.

[Biker 1]

Fastpedeller said:

I had a leasehold flat - the worst decision I ever made. After that experience, I wouldn't buy any property with eg a shared area/driveway. I appreciate drains (or at least parts of them) are shared and I'd avoid those wherever possible as well. Once bitten, twice shy!

Me too. There was ground rent, rather expensive building insurance, admin fees, landlord electricity bill for outside lights etc, communal gardening bills, & to top it all, gas & water was sub metered from landlord supply. Usually the management was pretty good, but not being in control of the costs was a ballache.

[98elise]

Sir Bagalot said:

I assume you mean a share of the freehold.

So you could buy it for £1,450

If you don't it gets auctioned off. Who could buy it? A company that likes charging management fees and adds 50% to every bill

Certainly make a counter offer, but my advice is to buy

It's not that kind of lease. Its £4 a year and cannot be increased. There are no management fees and bills.

Nobody would buy this for an investment because their legal fees would never be recovered. How much wiuld ypu pay for an asset that generates £4 a year?

[Octoposse]

Jeremy-75qq8 said:

I assume you mean buying the freehold. Buy it. It is peanuts money and the market for a leasehold house is far smaller than for a freehold.

Yes - we’re considering moving now, and feeding our nightly Rightmove addiction.

If it says “leasehold” we just scroll on by - rational or not, pool of potential buyers is larger for freehold,