To buy or not to buy?
The freehold on a long leasehold house. What is the difference between freehold and leasehold properties?
Freehold means you own the land and the property outright with no time limits. Leasehold is where the land the property sits on is owned by the freeholder and the home owner pays an annual charge (ground rent) to the freeholder. When the lease expires, the ownership of the property reverts to the freeholder unless the lease has been extended.
There has been a lot of adverse publicity about leasehold properties and escalating ground rents, which are causing issues for their owners. These relate to either short leases and/or ground rents, which multiply within a short space of time and can soon become eye-watering amounts and make the property unsaleable. Short leases (usually below 70 years) can be an issue for mortgage lenders and it can be costly to extend them.
Here in the north west we have something quite different, we have leasehold houses on long leases, generally 999 years with fixed, often nominal ground rents of a few pounds. The length of the lease is not an issue as the house may not be in existence by the time the lease ends. There is no provision for the ground rent to increase and the ground rent is fixed for the entire term of the lease.
We have noticed an increase in enquiries from our clients who have been offered the opportunity to buy their freehold by the freehold owner.
What do you need to consider?
1. What are you paying for?
In some cases, apart from owning the freehold all you are doing is getting rid of the obligation to pay the ground rent, which if it is only a few pounds a year, may not make economic sense. There can however be restrictions in deeds, for example, you need the freeholder’s consent to carry out an extension which can be a few hundred pounds, or administration fees for change of ownership or late payment fees which can make it worthwhile.
2. What is the total cost?
In most instances, it is not just the cost of buying the freehold that you need to consider but also the freeholders and your own legal costs and Land Registry fees.
3. Buying the freehold will not necessarily get rid of all the obligations in the lease, particularly on newer properties so we recommend if you do decide to proceed, that you have the paperwork checked by a solicitor.
4. Whilst buying the freehold will not necessarily increase the value of your house, it may make it more saleable due to the publicity surrounding leasehold properties.
If you are considering buying your freehold please contact Michelle Thompson for advice at: michelle.thompson@forbessolicitors.co.uk or phone 01254 222399
