Today, most newly built houses are freehold, and most flats are leasehold. When you buy a leasehold property you are not really buying the bricks and mortar or the land on which the property sits; you are buying the right to inhabit the property for the term of the lease. For the term of the lease, you will pay an annual ground rent to the freeholder which can be as little as £60 for the year,
If new houses are built as leasehold, they tend to have a long lease (999 years), which does amount to the same as freehold. The Morris Homes development behind Morrisons at Wilnecote is an example of homes that have been built as leasehold, starting at 999 years. The properties are likely to have fallen down before a lease needs extending here!
Properties that were built in the 1970’s around Tamworth in areas such as Lakeside, Wilnecote or Stonydelph as an example were built with a 99 year lease. These leases now have less than 60 years left, and this becomes a problem for people that need a long term mortgage, i.e. first time buyers.
Lenders will normally require leases to have 40 years left at the end of the mortgage term as a minimum, because the value of the property will become lower as the remaining period of a lease gets shorter. To purchase or extend the lease also becomes more expensive as the lease becomes shorter too.
What we are seeing now, is an increasing amount of properties coming to market as freehold on completion. This basically means that when a property is sold, the property will become a freehold property on completion, instead of leasehold. It also means that the vendor does not have to pay outright for the freehold, it is paid for out of the proceeds of the sale on completion. To purchase a freehold is also not the quickest transaction in the world, and can take 3 months or more.
Buyers are very weary of buying leasehold properties, so if you are looking to sell one, make sure you enquire about the cost of purchasing the freehold as it will improve the chances of a sale.
This link shows each mortgage lenders requirements for leasehold properties.
http://www.cml.org.uk/lenders-handbook/englandandwales/question-list/1846/
If you are looking to sell your property, or need some advice on what you should do, Next Place Property Agents are one of Tamworth's top selling estate agents, and are more than happy to discuss your situation.
Contact us on 01827 50700, or email us at info@next-place.co.uk. Our sales fees start at £395+VAT
