Quizzes & Puzzles9 mins ago
14 years left on lease? Help!
Following on from the question below..... My girlfriend's grandmother passed away recently and as a result she is to inherit her grandmother's house. (it's going through probate right now) The house however is leasehold and unfortunately only has 14 years left on the lease. (the house is 75 years old with an original lease of 99 years) She has contacted a solicitor who has said there is every chance the owners of the freehold will not sell her the lease or grant an extension as there are so few years left on it. (and the agents are apparently renowned for being dodgy!)I know from reading the previous question that if the lease were to run out the house could be taken. Surely if my girlfriend is prepared to buy it they've got to sell? Is this the case with all leasehold properties? If so it stinks. The house is mortgage-less and probably worth 150K. Any advice would be really grateful....
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I believe there are statutory provisions about buying a lease extension or the freehold. You need to check with
http://www.lease-advice.org/ to confirm whether I am right.
They have an advice service.
If an extension or the freehold is available it will be very expensive due to the short remaining term. Negotiating such purchases is a specialist & complex area - the Lease Advice org. has info about it. A specialist surveyor would be needed, & a solicitor who knew about the subject.
You may think it stinks, but it is standard practice under the law - a leasehold property is a "wasting asset" - i.e. its value declines the nearer you get to the end of the term. If the lease runs out the house has to be given back to the freeholder - there are no ifs & buts about it.
http://www.lease-advice.org/ to confirm whether I am right.
They have an advice service.
If an extension or the freehold is available it will be very expensive due to the short remaining term. Negotiating such purchases is a specialist & complex area - the Lease Advice org. has info about it. A specialist surveyor would be needed, & a solicitor who knew about the subject.
You may think it stinks, but it is standard practice under the law - a leasehold property is a "wasting asset" - i.e. its value declines the nearer you get to the end of the term. If the lease runs out the house has to be given back to the freeholder - there are no ifs & buts about it.
(2-part post):
When someone purchases the leasehold on a property, they're not buying perpetual ownership of the building. All that their money is getting them is fixed term ownership of the property. Thereafter, ownership of the property reverts to the freeholder
For example, if someone takes out a lease on a shop, they might pay �50,000 for a 5 year lease, with payments of �500 per month (as 'ground rent') throughout the five year period. At the end of that time, the freeholder can again offer the lease for sale, at whatever figure he chooses. (That's why you often see signs stating 'Closing down - End of lease'. The trader has decided that the price to renew the lease is too high for him).
If the trader, in that example, wants to move out a year early, he can sell the lease but he won't get �50,000 for it, because it will only provide the purchaser with 'ownership' of the shop for a single year. So, he'll be looking for around �10,000.
When someone purchases the leasehold on a property, they're not buying perpetual ownership of the building. All that their money is getting them is fixed term ownership of the property. Thereafter, ownership of the property reverts to the freeholder
For example, if someone takes out a lease on a shop, they might pay �50,000 for a 5 year lease, with payments of �500 per month (as 'ground rent') throughout the five year period. At the end of that time, the freeholder can again offer the lease for sale, at whatever figure he chooses. (That's why you often see signs stating 'Closing down - End of lease'. The trader has decided that the price to renew the lease is too high for him).
If the trader, in that example, wants to move out a year early, he can sell the lease but he won't get �50,000 for it, because it will only provide the purchaser with 'ownership' of the shop for a single year. So, he'll be looking for around �10,000.
The same basic principles apply to leasehold residential properties. (Although there are certain extra legal safeguards which apply to residential dwellings). The person who purchased the original lease didn't actually buy ownership of the building 'in perpetuity'. They only purchased 'ownership' of it for 99 years (probably at a 'peppercorn' annual ground rent).. That person had the right to sell the remaining part of the lease, at any time but, in the same way as the value of the shop lease declines as the remaining period declines, so does the value of the house lease.
Your statement that the house is worth �150K is open to interpretation. It would be worth �150K if your girlfriend was able to sell it freehold, but she can't because she doesn't own the freehold. It will be worth �150K (probably plus quite a bit more), to the freeholder, in 14 year's time when the lease expires and he re-gains full control of the house. However, it's current value to your girlfriend is far less. i.e. it's only worth as much as somebody is prepared to pay for the right to own it for just 14 years.
I know that a lawyer would point out that this response is considerably simplified but it remains true that the sale value of a leasehold property falls dramatically towards the end of the lease period.
Chris
Some childish arithmetic here. The lease is for 99 years, the house is 75 years old and there is only 14 years left on the lease?
Some childish thinking too. Presumably sub-letting is permissable. Current rent might be around �600 per month. 12 x �600 x 14 = �100,800 absolute minimum less a tiddly bit of ground rent. 12 x �600 x 24 = �172,800 ditto. Nothing stinks about that as an inheritance, Mr Jagger, you want to grow up.
Some childish thinking too. Presumably sub-letting is permissable. Current rent might be around �600 per month. 12 x �600 x 14 = �100,800 absolute minimum less a tiddly bit of ground rent. 12 x �600 x 24 = �172,800 ditto. Nothing stinks about that as an inheritance, Mr Jagger, you want to grow up.
Many thanks for all your responses especially the very articulate and informative reply from MustafaTickl.
I can sleep easy tonight in the knowledge that:
a) I am childish in both my thinking and my adding up
b) 75 + 14 = 89 and definitely not 99
c) 12 x �600 x 14 = �100,800
d) 12 x �600 x 24 = � 172,800
e) I want to grow up
I can sleep easy tonight in the knowledge that:
a) I am childish in both my thinking and my adding up
b) 75 + 14 = 89 and definitely not 99
c) 12 x �600 x 14 = �100,800
d) 12 x �600 x 24 = � 172,800
e) I want to grow up
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