Buying a leasehold flat - worth the risk?

[savoloysam]

I'm thinking about it but the risk of service charges and land rent going up at any point is putting me off.

As a first time buyer on an average wage it doesn't seem like a good idea to me but there are some tempting flats more in my price range than there is "cheap" terraced housing. It looks to me like your usual buy to let investers are currently keen to sell. Seems like a massive gamble to me and a guaranteed future headache. I may have answered my own question there but advice welcome.

 

[marty21]

It depends , I bought a leasehold flat , but it was part of a house , and I was able to buy the freehold as well . Weirdly I am both a freeholder & a leaseholder as I jointly own the freehold with downstairs and as freeholders we grant a lease to ourselves.

I wouldn't recommend buying a leasehold flat in a block , that's when service charges can be a shock, particularly when they replace the roof or lift .

 

[Puddy_Tat]

I'm thinking about it but the risk of service charges and land rent going up at any point is putting me off.

As a first time buyer on an average wage it doesn't seem like a good idea to me but there are some tempting flats more in my price range than there is "cheap" terraced housing. It looks to me like your usual buy to let investers are currently keen to sell. Seems like a massive gamble to me and a guaranteed future headache. I may have answered my own question there but advice welcome.

it depends.

i would say have a look at this thread, but there's quite a lot of it.

ultimately, you'll get more floor space for the same money with leasehold, but...

anything less than 80 years lease or so, lenders are reluctant to go near it (and if it's close to 80 years in the near future, you'll either have to pay to get the lease extended, or sell at a thumping loss.)

checking what the service charges / ground rent and if there's any elephant traps (like rip off inflationary clauses) are will be part of the searches, but you've started spending money on it by then.

you'll get stuck with maintenance charges now and then, but you can get stuck with maintenance costs if you buy somewhere freehold.

can depend who the freeholder is - councils generally take the piss less than vulture capitalists.

you can get 'share of freehold' where each leaseholder gets an equal share in the management company that owns the freehold - in theory this avoids profiteering, but can get complicated if one or two people are difficult.

high rise is probably a mistake - lenders don't like touching them, there could be cladding issues, and they can get damn expensive if anything needs repairs, as there's large amounts of scaffolding involved, and lifts cost money to maintain / replace.

Home - The Leasehold Advisory Service may be worth a look for more on how it all works.

governments keep making noises about reforming leasehold, but not sure they will ever tackle the vested interests of rich freeholders...

 

[weltweit]

If you can go freehold, I would. Leasehold is too much of an unknown imo

 

[Cid]

Where do people think service charges come from in share of freehold flats? With a share of freehold essentially you own a part of the company that owns the freehold. They also tend to be much smaller buildings. So sure, you get a bit more control over whether the service charges are raised. But you're also dealing with internal politics. And there is certainly still a risk element, potentially a much larger one. Also with leasehold you actually have a fair few rights against the management company, but I couldn't tell you details.

Quite apart from that, 94% of owner-occupied flats are leasehold, so y'know - good luck finding a freehold one. The whole term of lease thing is shitty, and unfair. Try and get one with more than 90 years (people say 80 years, but realistically that's when you may actually have to take action or lose value).

 

[Epona]

I'm a leaseholder in an ex council flat (large low-rise job, the block is comprised of lots of flats in a low rise terrace type thing over 3 storeys down a pedestrianised area).

With ex-council, the ground rent is pretty much a token amount and the service charges are fairly stable (£10pa ground rent, around £1,100pa service charge - the latter up from about £850pa when I bought the place 20 years ago).

In this sort of property though the thing you have to be aware of is that if the freeholder decides they are going to do major works to a large block, there is absolutely nothing you can do about it, you don't really get a say at all - the consultation process is just them telling you what is going to happen.

Here, the construction company that started doing the major works went bust halfway through and a new company was brought in- we didn't know the costs and then ended up getting a bill for over £18k a few years later and the council would only give us 2 years to pay it and were very unsympathetic.

Personally, although most of the time living in a leasehold flat has been fine, I would not choose to do so again unless there were no other options available - I'd rather get a smaller freehold house or something if at all possible.

 

[Boudicca]

This 'don't buy leasehold' is all very well but most flats are leasehold. Some leases you need to walk away from but most you just have to deal with.

 

[Cid]

I'm a leaseholder in an ex council flat (large low-rise job, the block is comprised of lots of flats in a low rise terrace type thing over 3 storeys down a pedestrianised area).

With ex-council, the ground rent is pretty much a token amount and the service charges are fairly stable (£10pa ground rent, around £1,100pa service charge - the latter up from about £850pa when I bought the place 20 years ago).

In this sort of property though the thing you have to be aware of is that if the freeholder decides they are going to do major works to a large block, there is absolutely nothing you can do about it, you don't really get a say at all - the consultation process is just them telling you what is going to happen.

Here, the construction company that started doing the major works went bust halfway through and a new company was brought in- we didn't know the costs and then ended up getting a bill for over £18k a few years later and the council would only give us 2 years to pay it and were very unsympathetic.

Personally, although most of the time living in a leasehold flat has been fine, I would not choose to do so again unless there were no other options available - I'd rather get a smaller freehold house or something if at all possible.

I believe leaseholders have to be consulted if there's any charge over £250. This may be different where the council owns the freehold.

I'd certainly recommend buying in a relatively new building, and taking someone who knows the trades with you. Also look at how well maintained it (the building, not the actual flat) is, because that will give you clues on the competence of the management company.

 

[Cloo]

Most flats are leasehold, though, so you're very limited if looking for freehold ones, certainly in London. You can see the lease, at least - new builds are mostly likely to have tricksy escalating leases; older flats like the conversion we lived in are, I think, more likely to have pretty low ground rent that only go up in price slowly and slightly like ours did.

 

[Storm Fox]

Going on personal experience, I'd avoid it. There's ground rent, service charges and costs of extending the lease to make it more sellable, if needed. The management company if you are not owning part of the freehold can charge stupid fees. When I had a leasehold flat they charged £30 a year just for postage.
If you band together with the other residents I believe you can change the agent, but as my block was mostly buy to lets, it was difficult. I had to extend the lease £3k on a £130k property before a sold it.

 

[Epona]

I believe leaseholders have to be consulted if there's any charge over £250. This may be different where the council owns the freehold.

I'd certainly recommend buying in a relatively new building, and taking someone who knows the trades with you. Also look at how well maintained it (the building, not the actual flat) is, because that will give you clues on the competence of the management company.

They have to be consulted, but when a large organisation like a council is doing the consulting, that doesn't mean much more other than you can request that the council considers a particular contractor in terms of getting quotes from them for the costings phase. Otherwise it just means they need to send in writing what is going to happen and when. It is mostly a paper exercise that doesn't mean much. Other than requesting that a particular contractor is considered, there isn't any say in the process and consultation is a one-way street.

 

[Cid]

They have to be consulted, but when a large organisation like a council is doing the consulting, that doesn't mean much more other than you can request that the council considers a particular contractor in terms of getting quotes from them for the costings phase. Otherwise it just means they need to send in writing what is going to happen and when. It is mostly a paper exercise that doesn't mean much. Other than requesting that a particular contractor is considered, there isn't any say in the process and consultation is a one-way street.

Ah right, yeah that’s shit. Though of course with freehold the costs are still there, you just get the chance to ignore them and hope nothing goes terribly wrong.

 

[Epona]

Ah right, yeah that’s shit. Though of course with freehold the costs are still there, you just get the chance to ignore them and hope nothing goes terribly wrong.

You can decide yourself a priority list of things that need to be tackled, maybe you can space it out over a period of time that is more affordable, maybe you can do some of the more minor stuff yourself, maybe you can come to an arrangement with a local builder etc etc.

In our case, the council got some sort of millennium grant for upgrading social housing and they did a whole load of stuff in one go, some of which wasn't that urgent, and just billed leaseholders for their share in what was a multi-million pound project.

 

[bellaozzydog]

No freeholders are legalised thiefs

I’m in two legal battles with immoral shit freeholders both of whom I hope are going to jail conservatively they have filched 300,000 quid off lease holders in bonk service charges and 85 owners are looking at a million quid fire safety charges

can’t recommend it

 

[scifisam]

Speaking as somebody who's never owned a property but for some reason is interested in reading about it, I have the strong impression that leasehold flats in converted houses aren't anywhere near as risky a proposition. They don't have lifts, don't usually have the sort of communal facilities that provide an excuse for high service charges, and most of the other costs (like replacing a roof) would be stuff you probably should get done anyway.

 

[Boudicca]

Speaking as somebody who's never owned a property but for some reason is interested in reading about it, I have the strong impression that leasehold flats in converted houses aren't anywhere near as risky a proposition. They don't have lifts, don't usually have the sort of communal facilities that provide an excuse for high service charges, and most of the other costs (like replacing a roof) would be stuff you probably should get done anyway.

Yes, I think the 'safest' option is a house which has been converted into two flats where both flats have a half share in the freehold. You then only have to agree what needs doing with one other person, and usually the lease itself helps with any possible arguments as it states how often things should be done.

 

[bimble]

Like everyone else has said it is still the default for flats in this country so hard to avoid.
If you have enough money to choose between a leasehold flat & a little freehold house I'd definitely go for the second option.

Another one here who has had legal dealings with seriously dodgy freeholders, basically they are in the extortion business, no other reason to go around buying freeholds. I did win, and they didn't get to arbitrarily charge us thousands of quid for totally unnecessary and wildly overpriced work that was done to the building (by their mates / cousins or whatever) but it was an absolutely enormous pain in the arse and i wouldn't now have the time to do all the work that it took to do that legal bollocks.
Leasehold law is a hideous medieval mess though it is improving.

 

[smmudge]

Not all leaseholds are the same. And their features (length, charges etc) can range wildly even in the same area.

When we were looking, we looked at share of freehold flats, flats with about 40 years left (er, no), flats with 90 years left and modest charges, flats with eye watering service charges for a fairly new property, flats that had just had the lease "extended" to 125 years, a flat where we'd be responsible for thousands of pounds maintenance bill as soon as we bought it....

In the end we bought a ground floor maisonette with just over 960 years on the lease (it started with 999). Peppercorn ground rent of £1 a year which they didn't collect, and no service charges. We were responsible for organising our own buildings insurance, maintaining the bricks of our own property, and jointly responsible with the owner upstairs for the floor/ceiling between us, and the roof. Probably the most freehold leasehold you can get. There would be some risk if something both us and neighbour were responsible for needed fixing and they were awkward about it, but we knew we wouldn't be there that long so took the risk.

I think leasehold is something you'll have to deal with if you want a flat, just something else to take into consideration when looking around and know the options.

A work mate was telling me about her house in a new build estate, how they essentially have to maintain their own area with monthly charges and a residents association.. that sounded just as bad to me, so even freeholds aren't always simpler!

 

[bellaozzydog]

Worth getting a solicitor to read the current lease on any property you are looking at to confirm there are no horror shows in it

 

[savoloysam]

Thanks for all the replies. My default is the same in that it seems too risky to somebody with "less than average finances" but depending on the property I wont rule it out (if I indeed opt to buy or just continue to be ripped off by every increasing rents) Hobson's choice hey.

 

[bellaozzydog]

I’ve just bought a leasehold but it’s only got two leasees involved and a freeholder

I’m the flat on top of a shop and everything is 50/50 on maintenance which ultimately suits me because I’m the one with the gutters the Victorian roof and ornate facias and the shot has to pay for it…..

having said that the freeholder is trying to contact me so fook knows I doubt it’s to give me a bag of cash

 

[Epona]

Thanks for all the replies. My default is the same in that it seems too risky to somebody with "less than average finances" but depending on the property I wont rule it out (if I indeed opt to buy or just continue to be ripped off by every increasing rents) Hobson's choice hey.

Despite my reservations that I posted above, I do think you need to take it on a property by property basis - my OH used to live (as a tenant, but related to the leaseholder) in the basement flat that also owned the garden of an older converted property, the freehold was jointly owned between the leaseholders, and it was a pretty nice setup tbh.

Just make sure you know what sort of beast you are dealing with when looking at leasehold properties!

 

[scifisam]

Thanks for all the replies. My default is the same in that it seems too risky to somebody with "less than average finances" but depending on the property I wont rule it out (if I indeed opt to buy or just continue to be ripped off by every increasing rents) Hobson's choice hey.

Course, if you have less than average finances you're unlikely to be able to afford a freehold house anyway.

 

[hash tag]

If you can go freehold, I would. Leasehold is too much of an unknown imo

Most flats are leasehold, though, so you're very limited if looking for freehold ones, certainly in London. You can see the lease, at least - new builds are mostly likely to have tricksy escalating leases; older flats like the conversion we lived in are, I think, more likely to have pretty low ground rent that only go up in price slowly and slightly like ours did.

Is it even possible to buy a pure freehold flat? and why would you. It is possible that you can own a flat with a lease but also own a share of the freehold, which is often the case with many new builds. The lease is there to protect you in the event of repairs, maintenance, disputes with neighbours Etc. You can mitigate the costs. If the property is quite old it is possible there will be high maintenance costs. It is likely to have high service charges if there are lots of common parts, inside and out, which need looking after, if there are lifts, gardens Etc.
When searching for leasehold properties, it is possible that the owner and/or the estate agent will have an idea of expected major costs or if any major works have been recently undertaken.

 

[Reno]

Is it even possible to buy a pure freehold flat? and why would you. It is possible that you can own a flat with a lease but also own a share of the freehold, which is often the case with many new builds. The lease is there to protect you in the event of repairs, maintenance, disputes with neighbours Etc. You can mitigate the costs. If the property is quite old it is possible there will be high maintenance costs. It is likely to have high service charges if there are lots of common parts, inside and out, which need looking after, if there are lifts, gardens Etc.
When searching for leasehold properties, it is possible that the owner and/or the estate agent will have an idea of expected major costs or if any major works have been recently undertaken.

I bought an ex-council flat and the constant threat of major repair bills didn't exactly give me the sense of security I was expecting from homeownership. The council always employed the same company, which did poor quality work and was overpriced, as the leaseholder you didn't get a say. I sold my flat after ten years and with the money I bought a flat in Berlin, where prices were cheaper and where leaseholds don't exist. You always buy a share of the freehold here, which means the property owners make the decisions. Leaseholds are completely unnecessary, they just get away with it in the UK because private renters are poorly protected, everything revolves around property ownership. Of course you never really own your property with a leasehold. That said, due to the increase in value of my London flat, buying it was the best financial decision I ever made but I'm glad I sold up when I did.

 

[tony.c]

Is it even possible to buy a pure freehold flat?

It is in Scotland, but I don't know how that works in regard to maintenance of common areas and exterior.

I have always lived in flats, rented or leasehold, as I couldn't afford a house in London.
There are pros and cons. I don't really like having to deal with building works so I'm happy to let the freeholder deal with building maintenance. Also as my current flat is one of four in a converted 1900s house the maintenance costs are split between the four leaseholders.
This has worked out well for the 20+ years I've lived here. Particularly as two of the flats are owned by the freeholders so they are also liable for half the cost of any work, which is an incentive for them not to overcharge. They have done most of the maintenance work themselves which has also kept the costs down. But they are now 85 and 86 so obviously less able to do any manual work - ten years ago they borrowed a scaffolding tower from a friend and painted the exterior giving it six coats!
I don't know what will happen when they are unable to do the maintenance and organisation themselves. I guess they will have to get a management company to organise things which will inevitably cost a lot more.

I've had experience of a management company in a previous flat. They weren't interested in doing any maintenance work, and when they did, once, they ripped us off. Management companies are supposed to get three quotes and take the lowest. But they obviously have builders they use regularly who can overcharge, and the management company gets 10% on top for organising the work.
We had window exteriors and common areas painted. The quote for the windows repainting was for stripping previous paint, priming, and two coats of paint.
But all that was actually done was that the original flaking paint was just painted over with one coat of gloss.

So it depends on how your maintenance is organised and charged for. You need to ask about that.

 

[Cid]

Freehold - very rare. There is no lease involved in this type of ownership, the freeholds are kind of stacked. Hard to mortgage. Weird.

Share of freehold - Two types. Mutual ownership the freehold is split between the owners, this only happens in small properties (maximum of 4 flats). Most common is where there's a managing company, and each tenant owns a share in the company. There is still a lease involved in share of freehold; it's just the whole 999 year thing, and is extendable at marginal cost. So you own a share of the freehold company, and that leases it back to you.

Leasehold - generally this is talking about the 99 year lease thing, extendable at substantial cost by 90 years. Though there are loads of variations...

For reference, after searching rightmove a bit, I can find a grand total of one possibly freehold/SoF flat in the whole of Sheffield.

 

[xenon]

Interesting. Possibly in a position to buy a flat in the near ish future. I was looking at one that seemed suspiciously cheap for central Bristol which is otherwise out of my budget... But then it had a 4 K anual charge for car park space + charges for other stuff. I suspect you can't opt out if you don't own a car...

 

[hash tag]

Interesting. Possibly in a position to buy a flat in the near ish future. I was looking at one that seemed suspiciously cheap for central Bristol which is otherwise out of my budget... But then it had a 4 K anual charge for car park space + charges for other stuff. I suspect you can't opt out if you don't own a car...

Sounds like it comes with the property. You could take a risk and maybe rent out the car parking space.

NB. Service charges can also include communal heating and hot water

 

[bellaozzydog]

Interesting. Possibly in a position to buy a flat in the near ish future. I was looking at one that seemed suspiciously cheap for central Bristol which is otherwise out of my budget... But then it had a 4 K anual charge for car park space + charges for other stuff. I suspect you can't opt out if you don't own a car...

anything over more than a few floors(18 meters I think) question if there is any cladding or fire issues outstanding and if it’s a multi unit place have a word with a few owners to see if there are any issues with the running of the place