To the best of my knowledge the only country in the world that is cursed with the concept of Leasehold Property is Britain. And historically that is largely down to the vested interests of our landed gentry.
It is essentially a carefully crafted fraud wherein leaseholders don’t actually BUY their property, they BORROW it from the Freeholder. They own the bricks and mortar, the fitted kitchen and bathroom etc – but they DON’T own the land. Hence the weird concept of ‘ground rent’.
Are you a Landlord or a Tenant?
Vast areas of Central London, for example, are actually owned by people like The Duke of Westminster and many of the buildings are really only ‘borrowed’ by the leaseholders who inhabit them. The landed gentry love the idea of leasehold tenure because it means they never ever entirely let the true ownership of their land slip into others’ hands. In fact if you are say a buy-to-let landlord you will actually often have seen the Freeholder referred to as your landlord!
Which brings me to the whole very modern concept of flat ‘ownership’. Many major house builders and developers have seen the benefit of ‘selling’ flats on ludicrously short 99 year leases. In fact, many people who bought 99 year leases only back in the 1990’s are already finding that their leases are approaching the all-important threshold of 80 years remaining. In fact, when the 70 year threshold is passed it becomes almost impossible to obtain a mortgage and thus the property’s value is badly affected.
We must thank Margaret Thatcher
Thanks to Margaret Thatcher, who was never a great friend of the parasitical landed gentry, the Leasehold Reform Act finally came into law in 1993, three years after she was forced out of office. This act at least went some way to restoring some power to leaseholders. It meant that from then on leaseholders could force their freeholder to sell them added years. Above 80 years there is a fairly precise formula related to the value of the property with the extended lease, the ground rent and the number of years still remaining on the existing lease. This formula is used to calculate how much premium a leaseholder must pay to extend. And because it’s a formula, it means there are limits on how much the freeholder can actually demand. But if your lease is under 80 years then it is more of an ‘open-market’ negotiation and likely to be much more expensive. The act importantly also gave groups of leaseholders in blocks of flats the right to force their freeholder to sell them the freehold. Ultimately disputes can be settled via the Leasehold Valuation Tribunal.
Is your lease approaching the 80 year threshold?
Many leaseholders are probably blissfully unaware that their lease may be approaching the 80 year point – and freeholders love it because at some point the leaseholder will want to extend their lease… Another problem with some leasehold property is that there are penal clauses in the leases and individuals and property companies study freeholds that are up for sale to find just such leases.
What I would like to see is it being made illegal from some future point to sell any property with less than a 999 year lease. But you can be sure that the landed gentry and other major land owners would fight such a proposal tooth and nail.
If you do need assistance and advice with legal aspects of your lease there is a pretty good government funded organisation called The Leasehold Advisory Service.