Monday, 28 October 2019

Leasehold Fleecehold

Leasehold Fleecehold

The last month has been a busy one to say the least, at the start of October I gave notice on the house I was renting. We were supposed to be buying our forever home, Luke, Leo and I, but unfortunately we cannot sell the flat Luke owns.

It's taken us a while to get to the cause of the issues we have experienced in selling Luke's property, 12 whole months in fact, but finally we have got to the bottom of the root cause, and unfortunately it has made Luke a prisoner in the flat he purchased, a flat that is currently un-mortgage-able and not even an attractive deal for a cash buyer..

Why?

The leasehold. 
(Or should I say Fleecehold!?)

We have had a number of people attempt to purchase this property over the course of a year, at least 4 first time buyers with a mortgage, and 1 cash buyer. (So I guess it's good that people do want to buy flats in the long run!)

All the buyers who hoped to obtain a mortgage crashed and burned. Their mortgage offer in principal was absolutely fine, but as soon as they got to the underwriters for an official offer, it was a big fat no.

The first 3 buyers didn't really shed a lot of light on why this was happening, and the estate agents didn't have a clue. We had found what was going to be our family home, and time was ticking. The chain had collapsed each time a buyer pulled out and I can only imagine how annoying this must have been for the person we were buying off.

We discovered that the banks would not lend due to the ground rent of the lease being more than 0.1% of the property value. As it stands the ground rent is £500 per year, and this doubles every 25 years.

This condition paired with the £500 annual ground rent is the root of all of our problems trying to sell, and we are not alone in this feat.

When the last mortgage offer fell off the table, we put the flat back on the market as a cash only purchase. This is of course meant that we were going to take a substantial hit on what would be offered, but we were at the point where we needed to cut our losses and get on with our lives.

We accepted a cash offer, and we had found a new property (a beautiful Victorian terrace with so much space!), and everything progressed beautifully. We were so excited to be making plans, and we could really see ourselves living our best lives in this house. 

Then the stumbling block... The cash buyer had been advised by their solicitor that they should not proceed with the sale.

Why?

The lease. 

They advised the buyer that the 25 year doubling clause of the lease was in fact toxic.  

The buyer got scared and subsequently backed out, which of course meant that we had to pull from our sale (again, after spending more money on searches and what not for a second property!). All the while we were running two properties with all of our possessions packed in readiness to move house.

It was then I realised that in order to move on with our lives we needed to consolidate and stop forking out money on a house and a flat. I handed in my notice and have not long handed the keys back. It's been a month of cleaning and sorting everything but we our finally at the other end of the move. 

The boxes are un-packed and there is finally light at the end of the long, dark lease tunnel. 

Luke has sought legal advice, and there is a solution to our problem, but it is going to cost us an arm and a leg. 

We can apply for a statutory lease extension, this will add 90 years to the the lease (I believe that there are still 112 years on the lease at this point anyway), but by doing this it will take the ground rent down to a peppercorn rent (something very affordable ££) which will in turn make it mortgage-able again, and the 25 year doubling won't be as daunting anymore. 

I mean if the ground rent was taken to £50 per year, in 25 years it would only be £100. 

Sounds great eh? To make this happen thought we need to employ a solicitor and we need to do this formally. If we were to go directly to the lease holder they could potentially do something to variate the lease terms... But it would in fact be an informal agreement that could make our situation worse. I have read of people accepting informal agreements where the ground rent is reduced... but the doubling clause goes from 25 years to 10 years... or even 5!

This of course means it looks attractive in the here and now, but very quickly can get out of control and will put you in even more of a negative position.

So the plan is this...

Luke called a meeting with the property management who in turn invited the other owners of the flats, they brought a long a solicitor who deals with leases and is very clued up on what must happen next. 

We will employ a solicitor to do all the leg work, get a quote from the leasehold on how much a statutory lease extension will cost , we will plough ahead (it could easily take 12 months), and could cost anything from £10k right up to 25k! We won't know until we get the official quote...

Ironically we will have to pay not only our legal fees.... But also the legal fees of the leaseholder. For the lease company this is a massive payday. They know that there comes a point where flats will become un-mortgageable, and that people will have to throw thousands of £ in their direction. 

It is wrong.

It's crazy that this can even exist in modern day Britain, it doesn't sound like it should be legal, or even a reality, but there our thousands of people trapped in their homes due to their lease holders keeping them prisoner, unable to sell. 

Luke has been advised to seek legal advice in regards to the solicitor who took him through the sale of the flat in 2016, because there was never any emphasis or warning on the leasehold.

It has been said that he should never have been given a mortgage on the property in the first place...

Now with all of the media attention on new builds and the leaseholds that have been attached to them, there is a lot more negativity and attention on leases, and the solicitors and lenders in turn are being much more wary.

That is great for the people browsing the housing market, but not so great for the people who want to move and get on with their lives.

2018 ended amazingly, we were newly engaged, buying a dream house and we even found out we were pregnant in early summer. A month later the pregnancy has ended, the house has fallen through and we cannot sell the flat.

Subsequently there is no wedding planning due to all available money being saved to sort out the lease.

2019 has been full of bumps in the road, but were still smiling and making the most of a not so great situation.

Let's hope 2020 is a better year.   




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