I keep seeing properrty leases for sale in auctions, and wondered what the deal is.
Description Freehold Ground Rent on Terrace House Guide Price 6,000 Plus Income 7 per annum Lot Number: 132 Lease Details: 80 Yr Commencing 01/01/1957
7 per annum on 6K invested is not to hot. There must be another angle.I guess there must be some kind of earner in 2037?
lease runs out in 2037 There would be a fee for renewing it.
you dont have to renew the lease , after the lease period the property reverts back to you , however the fly in the ointment is that domestic property owned in leasehold can have the lease bought out so that the leaseholders can obtain freehold of the property , thier are strict guidelines as to what can be charged
There are two main ways of "earning" on this: -
a. Right to extend - the leaseholder has the right to extend the lease, but has to pay a fair price for doing so, or you could negotiate a new one with higher ground rent.
b. reversion - the leaseholder becomes a statutory tenant and can be charged fair / market rent. if the property is empty then you get vacant possession as well.
There is the possibility of forfeiture, but in this case the rent is too low for this to be realistic.
Or before if the leaseholder wants to sell.
a property with 30 years left on a lease is virtually unsellable.
tim
Why? I suspect that not many people nowadays will stay in the same house for as long as 30 years. Or is it almost a self-fulfilling prophesy in that people do not want to buy with a 30 year lease because they fear that they will not be able sell (with an even shorter period left on the lease) when they themselves want to move?
Mortgage companies won't give a mortgage on less than 70 year leases
I beg to differ. The Nationwide quite happily gave us a mortgage on a property with a 66-year lease. And that was 5 years ago. And they were quite happy that at some point in the future we could extend the mortgage to buy the freehold. This was an off-the-shelf mortgage, nothing special.
But most Cos no doubt impose some sort of limit (i.e. length of lease at end of mortgage term >X)
It shouldn't be a big complication but of course the shorter it is, the more it will cost to extend.
The rule applied by mortgage companies used to be 25 years left after the expected repayment date of the loan. There are stories that they are tightening up and even 60 years is now marginal.
You are right that they shouldn't be so bothered because the lease can be extended, but you can't continually push this onto the next person.
tim
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