Freehold and Leasehold

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Freehold and Leasehold
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sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Thu Aug 11, 05 1:33 pm Post subject: Freehold and Leasehold

Our house is Leasehold, never bothered me before as its just over 100 years into a 999yr lease, and the ground rent in under £2 per year. However, we've juts been offered the Freehold for £540 inclusive of conveyancing costs. So, is it worth it? Will it really add any value to the property or give us any noticable benefits?

I have no idea what the freeehold on a house usually costs so I dunno if £500 is good or bad.

tahir

Joined: 28 Oct 2004
Posts: 45420
Location: Essex

Posted: Thu Aug 11, 05 1:40 pm Post subject:
Buy it, very quickly.

bernie-woman

Joined: 28 Oct 2004
Posts: 7824
Location: shropshire

Posted: Thu Aug 11, 05 1:44 pm Post subject:

tahir wrote:

Buy it, very quickly.

Absolutely - don't hesitate

Northern_Lad

Joined: 13 Dec 2004
Posts: 14210
Location: Somewhere

Posted: Thu Aug 11, 05 1:48 pm Post subject:
I agree, but I just like buying things. Any chance of reasons, please?

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Thu Aug 11, 05 1:53 pm Post subject:

Leasehold is just like leasing a car. It has to go back at the end.
The freeholder is like the lease company, ultimately he/they get ownership and in the meantime have all sorts of rights of veto... (details depend on the lease - its a contract and almost anything can go in, like approval of new tenant if you want to sell.)
It is massively better and simpler all round if you "really, really" own it - and that means owning the freehold rather than a time-limited right to occupy.
The "price" of the freehold goes up as the time on the lease runs out.

Including conveyancing? Be careful not to break their arm in your haste to grab it!

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Thu Aug 11, 05 2:03 pm Post subject:
Coo I'll take that as my cue to write a large cheque then.

thos

Joined: 08 Mar 2005
Posts: 1139
Location: Jauche, Duchy of Brabant (Bourgogne-ci) and Charolles, Duchy of Burgundy (Bourgogne-ça)

Posted: Thu Aug 11, 05 2:18 pm Post subject:

I hold a contrarian opinion on this too.

As tenant on a long leasehold you effectively hold all the rights anyway. The internal rate of return is 0.35%, which means the landlord is borrowing GBP540 from you and giving you 0.35% return. At 2.5% interest, the leasehold is worth GBP 82.00. Considering the collection cost, the landlord is getting nothing out of the existing arrangement. In fact it is probably costing him money.

I would politely tell him that you are not interested at that price.

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Thu Aug 11, 05 2:54 pm Post subject:
Hmm, interesting view. i'm confused now

tahir

Joined: 28 Oct 2004
Posts: 45420
Location: Essex

Posted: Thu Aug 11, 05 3:00 pm Post subject:
I'm sure the increase in value due to it being a freehold rather than leasehold would make up the difference.

Behemoth

Joined: 01 Dec 2004
Posts: 19023
Location: Leeds

Posted: Thu Aug 11, 05 3:01 pm Post subject:
I still prefer the tidyness of what you have is yours. You also get to say "Gert orf moi laaand" quite legitimately.

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Thu Aug 11, 05 3:25 pm Post subject:

Thos is perfectly correct that the current *investment* value of the freehold to any other buyer is only likely to be £100 or so.
However its value to you, Sally, is going to be higher, and that is going to be well-known to the freeholder.
Its going to make your property more attractive to buyers, not least because of removing the uncertainty (and consequent expense) of discovering exactly what constraints might be in the lease. And its going to make every sale of the property for the next 900 years simpler than it would otherwise be - ie its of value to your successors as well.
Thos is looking *only* at the revenue account and, I think, overlooking the capital side. Any capital consideration would factor in the value of the property, and what percentage uplift the benefit of being freehold would make. Ask Estate Agents. But, including all fees, it doesn't sound terribly expensive, to "get the monkey off your back".

With every successful sale, the price is one that the seller finds acceptable and that the buyer is prepared to pay.
By all means negotiate on the terms - the fact that they have approached you suggests that there might be scope for a counter offer, but the essential thing is that they are prepared to sell. (I'm sure the asking price would be higher if you had approached them!)

Jb

Joined: 08 Jun 2005
Posts: 7761
Location: 91ï¿½ N

Posted: Thu Aug 11, 05 3:48 pm Post subject:

I'd go with most people here and say buy it now and buy it quickly before they change their mind.

Regardless of rates of return etc. When, and for the vast majority of people it is when and not if, you come to sell you need to remember that a large number of potential buyers will see the word leasehold and immediately put your property details in the discard pile - they won't get as far as seeing that the lease is for 900 years or the ground rent is one peppercorn they will just skip straight past to the next freehold property.

Last edited by Jb on Fri Aug 12, 05 8:42 am; edited 1 time in total

Bugs

Joined: 28 Oct 2004
Posts: 10744

Posted: Thu Aug 11, 05 4:27 pm Post subject:

JB wrote:

a large number of potential buyers will see the word leasehold and immediately put your property details in the discard pile - they won't get as far as seeing that the lease is for 900 years or the ground rent is one peppercorn they will just skip straight past to the next freehold property.

Shortsighted it may be but I must admit to being one of those.

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Thu Aug 11, 05 5:22 pm Post subject:

Bugs wrote:

JB wrote:

Shortsighted it may be but I must admit to being one of those.

Yep, me too although if it's a very long lease I may look. It's one of those things that may not add instant value but may help sell the property quickly.

Another question is how many leasehold to freehold properties are there? If the whole area is leasehold it may be less of a factor.

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Fri Aug 12, 05 5:33 am Post subject:

Treacodactyl wrote:

Another question is how many leasehold to freehold properties are there? If the whole area is leasehold it may be less of a factor.

Hard to be sure round here, it was originally miners housing (though ours is 'posh' supervisors housing at the top of the hill!) so I would imagine a lot f it originall was leasehold, but a quick glance at the local estate agens shows mainly freehold, so I dunno.

All good advice everyone, thanks a lot. I think we'll be scraping up all the loose change under the sofa and raiding our piggy banks to buy ourselves a sheet of official paper...

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