Leasehold title - 30 years left

Chev2010

I'm looking at purchasing a property that is leasehold with about 30 years left to run on the lease (initial lease of 150 years). The seller has already started the process to convert this leasehold to "fee simple" or freehold, the conditions of sale state that the result (or lack of result) of this will not delay the sale of the house ie. If it's rejected that will not affect the sale. The nominal rent per year has been paid and is up to date.
Had a good look around the net but still unsure about the below.

My questions:
-If I purchase the house, how likely is it that I will get the freehold title?
-How long does it normally take to get these titles?
-Is this common?
-What happens in 30 years if I buy but don't get the freehold?
-Will a bank actually give a mortgage on a short lease like this, I have an impression they won't!
-Anything else I'm missing here? I'll be getting legal advice before doing anything, but would appreciate your input.

Thanks

valleyoftheunos

My answers in red below

Chev2010 wrote: »

I'm looking at purchasing a property that is leasehold with about 30 years left to run on the lease (initial lease of 150 years). The seller has already started the process to convert this leasehold to "fee simple" or freehold, the conditions of sale state that the result (or lack of result) of this will not delay the sale of the house ie. If it's rejected that will not affect the sale. The nominal rent per year has been paid and is up to date.
Had a good look around the net but still unsure about the below.

My questions:
-If I purchase the house, how likely is it that I will get the freehold title? Very, most likely you're entitled under the Ground rents Acts 1968 - 1972. Make sure you get legal advice from a Solicitor about this before proceeding with the sale
-How long does it normally take to get these titles? Not too Long, Months maybe.
-Is this common? Leases like this? yes very.
-What happens in 30 years if I buy but don't get the freehold? the property reverts to the person who owns the freehold and your interest in the property ends.
-Will a bank actually give a mortgage on a short lease like this, I have an impression they won't! No, or at leaset highly highly unlikely. 70 years remaining is usually the minimum.
-Anything else I'm missing here? I'll be getting legal advice before doing anything, but would appreciate your input.

You have most things covered I think, if the Ground Rent Acts apply then there is no reason why the Vendor shouldn't be able to get the Freehold before completing the sale. Your Solicitor will be able to advise you fully.

Thanks

mack81

The house I bought 3 years ago was in the same situation, condition of sale was that the land was purchased freehold by the seller.
My questions:
-If I purchase the house, how likely is it that I will get the freehold title? your solicitor wont complete the sale until all this has been sorted. you will know in acouple of weeks if it will be transferred to freehold but getting the title takes a lot longer.
-How long does it normally take to get these titles? took about 14 months before we got our title after we completed on the house. This is with the land registry which takes quite a while.
-Is this common? not sure how common but i would say its common enough depending on the area you live, especially if the house was once council owned.
-What happens in 30 years if I buy but don't get the freehold? not sure on this one.
-Will a bank actually give a mortgage on a short lease like this, I have an impression they won't! Yes I got mine, was 3 years ago so they might have changed since.
-Anything else I'm missing here? I'll be getting legal advice before doing anything, but would appreciate your input. we didnt know our land was leasehold until our solictor started the conveyancing, they sorted everything out after this. we didnt have to do anything else, just left it with them.
Definitly your solictor will know all this and you shouldnt really have to do much. Just make it a condition of sale that its freehold. Not much advice there but just my experience of it, hopefully should help a little.

valleyoftheunos

In red again;)

LowKeyReturn wrote: »

How long is a piece of string? There are many factors. Does the leaseholder want to sell it or is it a young chap thinking that's where he's going to retire to in 30 years time. Fee simple is freehold or at least the best sort of freehold. It's essentially what people mean when they say 'freehold'

The Vendor here is the Leaseholder. if the Ground rents acts apply the leaseholder is entitled to buy the Ground rent (ie the freehold) and the freeholder can't refuse. If the Freeholder can't be identified or found a the Freehold is transfered regardless and the monies paid into court.




Very but not normally with houses. Not that it's uncommon with houses just less common. It's the way 99% of apartments are sold.

Its actually quite common with Houses, it may change now with Apartments as Freehold covenants now pass with title (thanks to the 2009 Act) making the Leasehold structure of selling apartments unnecessary.



Lease is up in almost the same was as renting. Essentially you're out. They might offer to sell then but think about the position you'll be in.

Exactly the same as renting, the OP would have no further interest in the property.



Very doubtful - if they do it'll be for the value of the land with a 30 year tenure and be a short mortgage I would have thought.

As the other poster mentioned it can happen but I imagine it was in circumstances that the bank was satisfied that the Freehold could be secured.





Walk away sounds dodgy as f... hell.

Not at all, Long way to go before its walk away time. the scenario is very common and can be sorted without much difficulty, it may add costs however.

Chev2010

Thanks for the quick replies, really appreciated!

I'll add some detail here,
-It's an auction in a few weeks so won't be sorted by then - was only requested a few weeks ago, Conditions of Sale also states the outcome of this will not delay the purchase, in an auction you put down a 10% non-refundable deposit and are legally obliged to purchase so would be too late
-The solicitor for the leaseholder has accepted the offer to purchase the freehold subject to arbitration, but no price has been mentioned
-It's a company that own the leasehold, so assume they will be out for some profit (possibly a lot!)

So that makes me wonder if there is a max amount the leaseholder can ask for, or could they potentially ask for 200k knowing that in 30 years the properrty will be theirs? I've read about 20*lease price but nowhere did it say this was the max.

The thought of buying a house then being asked for a fortune for the freehold seems like a lot of risk to take - pity they didn't sort this before the sale!

valleyoftheunos

Chev2010 wrote: »

Thanks for the quick replies, really appreciated!

I'll add some detail here,
-It's an auction in a few weeks so won't be sorted by then - was only requested a few weeks ago, Conditions of Sale also states the outcome of this will not delay the purchase, in an auction you put down a 10% non-refundable deposit and are legally obliged to purchase so would be too late

make sure you speak to a solicitor before the Auction and are fully advised.

-The solicitor for the leaseholder has accepted the offer to purchase the freehold subject to arbitration, but no price has been mentioned
-It's a company that own the leasehold, so assume they will be out for some profit (possibly a lot!)

The freehold you mean? If its by arbitration its not the same as a straigt negotiation or private treaty, again be fully advised by your solicitor before the sale

So that makes me wonder if there is a max amount the leaseholder can ask for, or could they potentially ask for 200k knowing that in 30 years the properrty will be theirs? I've read about 20*lease price but nowhere did it say this was the max.

(Depending on the Property and the lease it is a multiple of the yearly rent or the fine(ie the amount paid at the start of the lease)

I think you're a bit confused here, the leaseholder don't own the freehold so the property can't be theirs in 30 years time. If you mean the freeholder the property won't revert to them if you by the freehold.

The thought of buying a house then being asked for a fortune for the freehold seems like a lot of risk to take - pity they didn't sort this before the sale!

the amounts only get big when into the final 15 years of the Lease.

Chev2010

This is interesting, I wonder how many people get caught out paying huge amounts after purchasing a property. Have you dealt with these issues before, wondering what values you've seen charged to purchase the freehold (appreciate there are a huge amount of variables) - I found an online calculator for the UK and it suggested 132-150k

Yes, think I mixed terminology there, my understanding is that after 30 years the property reverts to the freeholder (in this case the company) and I'm out.

It's amazing how many things you pick up when doing something new like this - I'm a first time buyer in case you didn't notice!!!

The nasty side of me is now wondering if I could try to out bid the current owners for the freehold and wait 30 years for the house :P

valleyoftheunos

Chev2010 wrote: »

This is interesting, I wonder how many people get caught out paying huge amounts after purchasing a property. Have you dealt with these issues before, wondering what values you've seen charged to purchase the freehold (appreciate there are a huge amount of variables) - I found an online calculator for the UK and it suggested 132-150k

I would be nothing like that, ones I've seen have been less than a thousand up to €5K on arbitration. the arbitration is done by the Land Registry and they use formulas so it is somewhat scientific. the Formula are set out in s7 of the ground rents act 1984

Yes, think I mixed terminology there, my understanding is that after 30 years the property reverts to the freeholder (in this case the company) and I'm out.

Unless you by the Freehold.


It's amazing how many things you pick up when doing something new like this - I'm a first time buyer in case you didn't notice!!!

The nasty side of me is now wondering if I could try to out bid the current owners for the freehold and wait 30 years for the house :P

It wouldn't be worth anything as whoever owns the Leasehold would be entitled to buy out the freehold from you for a somewhat nominal amount.:D

Hope that all helps!

Chev2010

That does help, thanks!

Had a read through Section 7 of the Grounds Rent Act 1984 but see no reference to how the formula is actually constructed or any guidance as to how a value is calculated other than the "Arbitrator will calculate a fair value".

I sent the Land Registry an enquiry, lets hope they may be able to give some guidance - the valuation seems quite opern to interpretation. By the sound of it the bank won't actually give me a mortgage on such a short lease as there's a risk of losing the entirety of the property in the not too distance future.

Any other suggestions or experience would be welcomed!

Cheers..

StillWaters

Chev2010 wrote: »

That does help, thanks!

Had a read through Section 7 of the Grounds Rent Act 1984 but see no reference to how the formula is actually constructed or any guidance as to how a value is calculated other than the "Arbitrator will calculate a fair value".

I sent the Land Registry an enquiry, lets hope they may be able to give some guidance - the valuation seems quite opern to interpretation. By the sound of it the bank won't actually give me a mortgage on such a short lease as there's a risk of losing the entirety of the property in the not too distance future.

Any other suggestions or experience would be welcomed!

Cheers..

I cant see you getting a mortgage on this. There is no way I would purchase something with such a short lease at auction even with cash.

valleyoftheunos

StillWaters wrote: »

I cant see you getting a mortgage on this. There is no way I would purchase something with such a short lease at auction even with cash.

If the Ground Rent's Act 1978 act applies to the property the lease isn't really an issue as the freehold can be acquired by arbitration. Of course you woud want to be very sure of that before bidding at auction and I'd agree that a mortgage is unlikely.

StillWaters

valleyoftheunos wrote: »

If the Ground Rent's Act 1978 act applies to the property the lease isn't really an issue as the freehold can be acquired by arbitration. Of course you woud want to be very sure of that before bidding at auction and I'd agree that a mortgage is unlikely.

Yes, but the freehold wont be cheap on a lease that short, and you are buying a pig in a poke.

valleyoftheunos

StillWaters wrote: »

Yes, but the freehold wont be cheap on a lease that short, and you are buying a pig in a poke.

The Freehold shouldn't be unreasonable and naturally that would be factored into the price of the leasehold