There have been cases where people have bough leasehold properties on leasehold land, leaving themselves wide open to pay sometimes eye watering rates. While some charges start off reasonable, they very often increase sharply.
There have also been cases where the land beneath the leasehold property has been sold on, with the new contractor then imposing new rules and rates.
Either way, homeowners face huge charges and are unlikely to be able to onward sell their properties for a decent price.
Four things you should be able to tell clients about when selling leasehold properties:
Ground rent. Usually paid annually to the landlord and may rise over time. How much is it, and what are the terms? i.e. Does it double every year or follow inflation? These costs can quickly spiral out of control.
Service charge. How much is it and what does it cover?
Reserve fund. This is a sum that leaseholders pay to a managing agent for works that may have to be addressed in the future. Is there one, and has it built up? This can be presented as a benefit to a buyer, as potential future repairs may already be covered.
Length of lease remaining. Very often, an add will advertise the lease length as it was at the very beginning of the properties life span. So, this may say 999 years’ lease. Even though only 100 years remain. If the remaining lese length is 85 years or less, be aware. Many lenders will not lend on less than 80 years. The cost of extending a lease after that time also increases dramatically.