Freehold and Leasehold

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Freehold and Leasehold
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sally_in_wales
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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-�a)

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
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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: 45674
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: 91� 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
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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
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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...

thos

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

Posted: Fri Aug 12, 05 7:47 am Post subject:
There is no harm in asking a local estate agent if being freehold rather than long leasehold would make the property more attractive to buyers - would it make a quicker sale and give a higher price?

jema
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Joined: 28 Oct 2004
Posts: 28237
Location: escaped from Swindon

Posted: Fri Aug 12, 05 7:59 am Post subject:

JB wrote:

I'd go with most people here and say buy it now and but 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.

I'd agree with the buying, but there is no strict hurry, as other have pointed out the lease is a liability to the landlord. So this offer will likely stay on the table, and may even be negotiable.

High Green Farm

Joined: 30 Nov 2004
Posts: 349
Location: Mid-Suffolk

Posted: Fri Aug 12, 05 8:18 am Post subject:
Alternatively stick the money in the bank....just somewhere where you're guaranteed to get 2% net per annum for ever, and in 999 years time you'll have �210,845,992,054

wellington womble

Joined: 08 Nov 2004
Posts: 15051
Location: East Midlands

Posted: Fri Aug 12, 05 8:24 am Post subject:
I'd buy it, cos I like things to be tidy, and for that amount, I'd reckon it's worth it. I like the amounts in HGH calculations, though I wonder how much that will be worth in 999 years time, and what a small pile of dust would spend it on (worm defences, perhaps!?)

tawny owl

Joined: 29 Apr 2005
Posts: 563
Location: Hampshire

Posted: Fri Aug 12, 05 11:42 am Post subject:

dougal wrote:

And it includes the conveyancing costs, which would probably be a couple of hundred anyway, solicitors being the expensive little devils that they are. In all honesty, you're going to end up owning your house outright for the cost of a fortnight's package holiday. I'd say grab it, but as others have said, see if you can get a few quid off, and get them to do the Land Registry transfer for you as well.

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