Decided to go and look at some new build homes the other day. Really nice houses and one (a 4 bedroom) we thought was really really nice and not bad for £323,000 considering.
Then I thought hang on maybe these are leasehold and they are with no option to ever buy the lease! I think the lease is £200pa and lasts 999 years but if it's like all the others recently it doubles every 10 years.
So in 100 years that would be just under £205k pa (I know the pound won't be worth as much). But in 999 years (so 990) that would make it £126,765,060,022,823,000,000,000,000,000,000 :-) Or in words:
one hundred and twenty-six nonillion seven hundred and sixty-five octillion sixty septillion and twenty-two sextillion eight hundred and twenty-three quintillion
I know these homes won't exist then but even in 50 years the lease cost is £6400.
Last edited by: rtj70 on Sat 10 Feb 18 at 23:55
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Perhaps you should refrain from buying one of those houses?
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Read quite a bit about the scandal - builders have then sold off the lease after a few years & pocketed thousands for each plot. The lease can be bought but at fantastic multiples of the annual charge - £40K from the new leaseholder is not uncommon after less than 10 years since they were built. Also charged are fees when you want to extend the house, build a garage etc etc - thousands on each occasion.
Some building Societies are not lending on houses where the lease doubles e.g Nationwide who also stipulate ground rent is to be less than 0.01% of the sale price.
Leaseholding is not common in Scotland, flats in the main. My house was on a Feu (Ground Rent) a flat fee of £50 per year for 999 years. About 30 years ago a new law passed - you could buy you Feu for a multiple of the annual fee depending on the B of E interest rate - I recall paying some £300 at that time when interest rates/ government bonds were paying some 9 or 10%.
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>> Some building Societies are not lending on houses where the lease doubles e.g Nationwide who
>> also stipulate ground rent is to be less than 0.01% of the sale price.
>>
My earlier response was of course, tongue in cheek.
Surely, no one in their right mind would take out one of those leases?
No lender should lend!
Any solicitor would/should warn, in the strongest possible terms, against purchase?
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>>Any solicitor would/should warn, in the strongest possible terms, against purchase?
Many buyers did not get independent legal advice - they bought the house & used the Builder's nominated Lawyer............if the lawyer nominated by the builder wanted to keep the flow of business (on a low margin) then they needed to shift the paperwork ASAP he had to follow the line set by the builder.
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The Guardian, amongst other papers, has run a long campaign on this. As a result the sale of new leasehold houses was supposed to have been banned from late 2017:
www.ft.com/content/0107b0c6-e5a2-11e7-8b99-0191e45377ec
The OP suggests the developer has found a loophole, or at least has failed to update point of sale information.
Many who bought under this system are now stuck in unsaleable properties as Nationwide is by no means the only lender refusing mortgages. Some are also faced with escalating 'service charges' for things like mowing grass and maintaining children's play areas.
Lawyers who acted for the purchaser and failed to give a clear, explicit and written explanation of the dangers are, on face, guilty of professional negligence. The chap who acted for us when we bought this place would have been shouting from the rooftops over anything like this.
Their professional indemnity insurers must be making provision for a lot of substantial payouts.
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Probably the next mis-selling scandal.
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>> Probably the next mis-selling scandal.
It absolutely is.
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>> The Guardian, amongst other papers, has run a long campaign on this. As a result
>> the sale of new leasehold houses was supposed to have been banned from late 2017:
>>
>> www.ft.com/content/0107b0c6-e5a2-11e7-8b99-0191e45377ec
Missed the edit. Although that link refers to a ban starting in December it's vague on the legislative means by which a prohibition would be achieved. Other sources, including the Minister's press release suggest the government has made nothing more than a statement of intent:
www.gov.uk/government/news/crackdown-on-unfair-leasehold-practices--2
Given (a) the proposal involves a prospective Law Commission project and (b) the opportunity cost of Brexit in terms of ministerial focus and draftsman's time preparing and passing legislation it may be some while before anything is achieved.
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Leashold, per say, is not a bad thing. For flats, terraces, gated or private communities its a good, almost essential vehicle.
What happened here was leasehold as a cynical hidden form of blackmail revenue.
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>> Leashold, per say, is not a bad thing. For flats, terraces, gated or private communities
>> its a good, almost essential vehicle.
It's certainly the standard for flats where there is a need for mutual obligations to repair etc though there have been attempts to create 'commonhold' where the freehold is owned collectively. A French acquaintance of mine shakes her head in disbelief over the run around she gets from her freeholder over stuff as simple as replacing the garden gate.
>> What happened here was leasehold as a cynical hidden form of blackmail revenue.
Absolutely, and it was sold as a means of making ownership cheaper as, where the option was offered, leasehold was several £k cheaper than freehold.
Pedants Note: The correct spelling is per se not per say:
dictionary.cambridge.org/dictionary/english/per-se
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>> > it was sold as a means of making ownership cheaper as, where the
>> option was offered, leasehold was several £k cheaper than freehold.
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So in effect, the buyer is taking out a loan for the initial discount and then paying an exorbitant and increasing rate of interest indefinitely.
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Son bought a flat, well rather I supplied spotted it for sale, the cash upfront for the deposit, fees, some furnishing etc etc - best buy ever he made as it was the future deposit for a house.
There was a maintenance fee which was £25/ mth- cleaned halls, stairs, swept up outside, cut grass etc etc. He moaned but coming to sell the flat 5/ 6 years later he saw the value - outside & inside it was like the day he moved in - sold easily as the whole lot of 70/80 flats looked good.
Only fly in the ointment was the factor who arranged it all - their fees rose as part of the monthly cost & when the outside/windows needing painting they came up with £00s each! - their painters were to be there for some 2/3 weeks, required hire of cherry picker, painters were allowed 1 hour travel morning & night to be paid for........ Tenants revolt - local painter, long ladders 2 or 3 men took a month for about 25% of the bill.
I do not know how things are today re the cost etc as my son moved to a house - 25 years on since buildings went up the flats still look great.
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The development these houses are on is still selling the properties as leasehold - and there is no option to buy. We didn't bother asking how much the lease or how it will increase over time. The same developer on other sites sells the same houses as freehold for the same price.
I was curious last night and did some more digging to see why these are leasehold and you cannot buy the lease. Turns out the site itself is owned by Peel Holdings and there are two developers building houses. Originally Peel Holdings were wanting to build 1000 homes on Green Belt land and they were refused permission. But Eric Pickles in the end is partly responsible for permission being given for 350 homes - the need for new homes outweighed the need to keep green belt land.
But during my investigation I uncovered other things that would put me off spending anything on a home on this site. It's named to sound like an old farm land and it was indeed a farm at some point but had a different name. But the 'interesting' points which would put most people off if they knew are:
1. There used to be mines on this site where there were originally 9 shafts. There are about 5 coal seams under the land.
2. There was some open cast mining at one point too.
3. The Thirlmere aqueduct runs through the middle of the development - it was diverted/moved when they built the M62/M63.
4. There's an old land fill site at the end of the development and nobody knows for sure what was dumped there
All of the above is in a document commissioned by Peel Holding themselves to argue for developing the site.
Maybe the fact the aqueduct runs through it and there's old mines means Peel Holdings has to have a say over what anyone can do on this land?
They were still nice houses though and I'd consider one in another location that was freehold.
Last edited by: rtj70 on Sun 11 Feb 18 at 15:36
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>>but if it's like all the others recently it doubles every 10 years.
And if it isn't? You've written an entire post here moaning about something that might not be true! I guess that's the point of a discussion forum...
Doubling every 10 years is, in fact, only 7% p.a. which over the last fifty years is barely above the average rate of inflation. And don't doubt that inflation is on its way again.
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If rises were capped at a suitable inflation measure, then that would have a certain logic. But averaging more than inflation will eventually make the house worthless regardless of the length of lease remaining. Taylor Wimpey acted immorally IMO and the solicitors who acted for the buyers must have been incompetent.
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Not new build or houses but an egregious use of landlord's powers to raise ground rents as high as £8k pa
www.theguardian.com/money/2018/feb/22/freehold-on-disputed-birmingham-leasehold-flats-goes-on-sale
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He's a crook. TW & Co are probably not crooks, quite.
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New Build Houses and Leasehold - Duncan
