Cautionary tales of leaseholder regret

published 10 September 2018

180910-leasholds — Make sure you know exactly what you're buying

If you buy house or flat, make sure you buy one that really belongs to you. The dangers of not doing so of buying a long leasehold instead of a freehold in England or Wales are becoming clearer every day.

Who, for example, could possibly imagine paying £520,000 for a flat and then finding themselves being evicted because their lease has been made "void." That, says Helen Davies in the Sunday Times, is exactly what has just happened to one leaseholder.

His freeholder who lived in the flat below him got fed up with him breaching the terms of his long lease (with "unauthorised renovations") and eventually started forfeiture proceedings against him. He failed to turn up to court. She took over his flat.

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Anyone who thinks that a leaseholder is anything other than a tenant who has paid a lot of rent upfront needs to read that story again. He isn't. This happens "60-70 times a year", says Davies, and is "threatened routinely".

However, there are many stages of misery between buying and the extremity of forfeiture. A report out from Propertymark this week (Leasehold: A Life Sentence) makes the point.

Almost half those who have bought leasehold houses in the last ten years didn't know that's what they were until too late, presumably partly because 65% of them used the solicitor the housebuilder recommended.

Two-thirds feel they were one way or another missold; 50% didn't understand that their ground rent would escalate; and, worst of all, a third of those trying to sell find that "they are struggling because they don't own the freehold" That makes sense.

Who would want to buy other than at a hefty discount into a property arrangement that means you have to pay for the upkeep of communal areas (on top of your council tax) and also might have to pay just to make cosmetic changes to "your" house 10% of those surveyed said had faced a charge for doing so. Think £887 to change the kitchen units!

No wonder that 94% of the 1,000 leaseholders surveyed said they regretted buying a leasehold.

Buying a flat in London under an old leasehold with clear service charges and very low ground rent is not as risky as buying a new build leasehold from a rapacious house builder. But the overall message here is pretty clear: don't join the 94%.

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.