New Government guide to leasehold homes.

“Leasehold is a type of long-term tenancy; it is not the same as outright ownership”.

When you ‘buy’ a leasehold property, you do not become the owner of the property: you acquire the right to occupy it for the amount of time that is remaining on the lease. This guide uses ‘buy’, ‘buyer’, ‘sale’ and ‘purchase’ in that context.

Thinking of buying?

If the property you are interested in is leasehold, this means you, as the buyer (i.e. the ‘leaseholder’) will be signing a contract which grants you the right to occupy a property for a fixed number of years. This length of time (i.e. the ‘term’) should be specified in the contract (i.e. the ‘lease’). The building structure and any common parts will be owned by the freeholder who is likely to be your landlord.

When you fail to pay or the lease term reaches zero, the landlord can re-possess the property.

Press release 27th June 2019
Leasehold axed for all new houses in move to place fairness at heart of housing market

The Rt Hon James Brokenshire MP Tweet
Hopton Build, offering freehold apartments - altogether a better way says:-

With leasehold you never own and have to hand the property back at the end of the term; You pay  a significant sum of money up-front, often mortgaged.  But its the many, often hidden,  additional fees and expenses that are the killer.

That’s why we have sought to find a better alternative. Our apartments are Freehold within a Commonhold Association.

Leaseholders usually have to pay:- annual ground rent to their landlord freeholder. Often also having uncontrollable permission and management fees, pay ongoing maintenance for the building whilst also contributing to a savings account,  – yet you never own it!, and this is on top of all heating, lighting, cleaning and gardening of communal areas.

The new PPI scandal!

The lease term

Awareness  of the multitude of leasehold issues is building. Late 2019 is all set to become the PPI realisation of the leasehold homes market. Most apartments and many modern detached and semi detached houses are leasehold and facing the same issues, particularly those built by the larger builders.

Mortgage lenders are getting nervous and increasingly declining to lend on the reducing assets, even now most will not give a mortgage below 80 years and increasingly some want 100+ years left on the lease. 

No, or more expensive mortgages and increasing public awareness! Could leasehold properties  become in danger of being unsalable; the leaseholder is cornered, still committed to the requisite payments? It is already happening to some!

The ground rent

Increasing ground rents also compounds the problem. Some doubling every 10 or 15 years. 

A new criteria gaining ground amongst mortgage lenders is they will not mortgage new properties with ground rents above 0.1% of the property value at any time during its mortgage. Un-mortgageable if ground rent is over £100 per £100,000 of property value! What about the future when you want to sell?

What if the council of mortgage lenders also decide to apply that rule to existing apartments? It will decimate their values as ground rent is higher, or scheduled to be higher, in many existing leasehold properties. Congratulations on Eddie Hughes M.P who is ahead of the game. 

Houses of Parliament 25th June 2019
Unable to pay the increasing fees,
Unable to sell?
A new bill was successfully introduced into parliament .....

Stuck with a leasehold property! 
As the lease gets shorter it loses value.

Losses are now becoming more significant as the market re-appraises the situation now developing.

Existing Properties

For the few fortunate leaseholders who also own a share in the company owning the freehold, they can determine their own overheads and ground rents. For  others, the majority,  it could become a desperate situation. If in doubt just check your lease terms, your solicitors should have previously advised you on the details. By the way there is a law class developing against solicitors as well!

With increasing and doubling ground rents on existing properties many couples who thought they were “home owners and investors” may not be able to pay, not be able to sell, and instead of having the foundation of their own home to raise their family, now find the only option is to lose their home, possibly becoming bankrupt as they are unable to continue with their commitments. Bankruptcy will drastically affect their future lives! New realisation at the highest level is why the government is now acting. See Gov briefing papers. 

Buyers were mislead?

If you think you purchased a property and were told you could buy the freehold after 2 years or were not advised you, as a leaseholder, will be only a tenant then there is a consumer law investigation being undertaken and they want to hear from you. They want to determine if you were miss-sold and evaluate if there could be compensation for leasehold agreements to be cancelled / varied or both.

Be ahead of the crowd.

If you know of someone looking at buying a property just ask them if its leasehold. The majority of apartments are leasehold and an increasing number of new build homes. Leasehold should be understood – especially if the leaseholders don’t own a share of the freehold – but they need to know what to check. Being ahead of the crowd and understanding the issues is so important.

That’s why Hopton Build at Liversedge are leading the way with freehold apartments. Share our information, follow us or:-  I would like to say buy from us but we only have 2 left and they will not be available for long.

Join The National Leasehold Campaign on facebook and twitter. Help pages are also currently being developed. The Leasehold Knowledge Partnership, the secretariat for the All Party Political Group is also an amazing source of information without both their help we couldn’t have developed our freehold apartments within a commonhold scheme.

Please circulate to your friends, family. For those currently owning and stuck with leasehold don’t lose heart there are big changes afoot but it will take a few years to legislate. This is about to be bigger than the banks PPI. Builders charged with miss-selling, Solicitors investigated, The CMA – Competitions and Markets Authority are now tasked with reviewing!   Further reading Here

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