By Paula Murphy
Is your home leasehold? If so, do you know how many years are left remaining before ownership of your home reverts to the owner? If you don’t know, I would strongly suggest that you check. If your home is freehold you own it outright and forever. You can do with it what you want, when you want, without having to ask the owner (or freeholder) for permission to make alterations or transfer the property to someone else. If you own the freehold you will never have to ask the owner “can I buy the freehold from you?” or “can I extend the years left on my lease?”
So, what is the problem if your property is leasehold, rather than freehold? Well, it’s basically the ever-decreasing lease and the fact that your term of ownership is running out. In the 1960s whole housing estates were built and sold as leasehold properties, on 99 year leases. Areas like Killay and Dunvant are prime examples. If your lease started in 1965 it will end in 2064. Now, you may think that’s 50 years away, so what? Loads of time left!
However, the problem is, that if you have 55 years or less left on your lease, your home is unmarketable. When you come to sell your home (either now or in the future or by your executors after your days) no mortgage lender will provide a mortgage to a purchaser if there are less than 55 years left on the lease. Even if your purchaser doesn’t need a mortgage, no solicitor would advise their client to buy it without it either being freehold or having a much longer time left on the lease.
So what can you do to address this problem? Well, there are laws available to protect you. You can either ask the owner (the freeholder) to sell you the freehold or you can ask for the term of the lease to be extended.
Of these two options, buying the freehold is by far the better, and therefore, the most popular choice. This is because you will no longer be beholden to anyone and your home will be yours entirely. No more ground rent payments, asking permission for extensions and so on.
If you are interested in purchasing the freehold it is important that you do so as soon as possible because as the term of the lease reduces, the cost of the freehold increases year by year.
Over the last few years I have dealt with numerous freehold purchases. Most are relatively straightforward and not too costly. However, as with life in general, some problems do arise. In some cases, freeholders will ask far too much for the price. There is a formula for calculating the cost and it is dependent upon the value of the property, the length of time left on the lease and the yield rates applied. It is a specialist formula and calculation and I have been fortunate enough to find a professional partner with whom I consult for advice and who prepare valuation reports for my clients who have basically been given a price which has been plucked from the air by some land owners. The name of those professionals is Rowland Jones Chartered Surveyors. They have prepared several valuations for clients of mine and they have, in every single case so far, valued the cost of the freehold at a much lower figure than the freeholder has asked for. In turn, this has saved those clients thousands of pounds.
If you are concerned about your own home or what will happen in the future to your family’s inheritance, please contact me for a chat.