New 125 yr lease- premium lower than if a longer term?

[Bel]

I've seen a flat with a new 125 year lease.

How would you expect its market value to likely compare with similar property with longer lease eg 499 yrs ??

[kikuyu]

I've seen a flat with a new 125 year lease.

How would you expect its market value to likely compare with similar property with longer lease eg 499 yrs ??

Surely you mean 999 years? or is it shorter leases of 99 years duration?

Just curious!

[quarterday]

Is a 125 year lease worth less than a 499 year lease

you might think so but in reality the difference is negligible

[sgclacy]

you might think so but in reality the difference is negligible

In more recent years developers have found that it is in their interest to sell on 125 year leases rather than 99. The majority of purpose built flats are sold be developers on 125 years leases. Unless of course teh developer sees a commercial advantage in holding the freehold for say its pension fund

With a 99 year lease the term becomes an issue within a generation of it being granted ("a generation" being defined as around 20 years) and sure enough 99 years less 20 years = 79 years = the begining of a problem which will only increase as time goes buy

A new 125 year lease -V- 150 years -V- 999 years as "quarterday" states is irrelevent

[Bel]

So 125yr flat lease is normal and would not put off property buyers who are used to unlimited freeholds usual to houses?

[Gordon999]

I think many buyers do not really understand the difference between freehold and leasehold titles. I have seen some postings by Jeffrey in LZforum pointing out - "I think you are the leaseholder and the other party is the freeholder".

[Poppy]

... used to unlimited freeholds

Bel, Are you suggesting that someone who has previously bought freehold property as their home, would suddenly decide to buy a leasehold property? I very much doubt that.

I am guessing that the most likely group of people to do such a thing would be older people looking for smaller, professionally-managed sheltered housing.

[jeffrey]

Bel, Are you suggesting that someone who has previously bought freehold property as their home, would suddenly decide to buy a leasehold property? I very much doubt that.

Tosh! Virtually all flats in E&W are leasehold.

[mind the gap]

Tosh! Virtually all flats in E&W are leasehold.

That you for that friendly correction, Jeffrey.

Indigestion is a terrible thing, I always think.

[Bel]

Bel, Are you suggesting that someone who has previously bought freehold property as their home, would suddenly decide to buy a leasehold property? I very much doubt that.

I am guessing that the most likely group of people to do such a thing would be older people looking for smaller, professionally-managed sheltered housing.

My angle is, if I buy how easy is it to sell?

I know by what Jeffrey says that leasehold flats (125 years doesn't sound like a long time to me) are commonplace, is the appeal (or lack of) of leasehold a major turn-off to a whole swathe of potential buyers, including investment buyers.

Of course the other turnoff is service charges.

I realise that the lease can be extended at some future time, at a cost and hassle.

[jeffrey]

The fact that 99.999% of flats are leasehold deters very few potential purchasers in the real world.

[James 2009]

The fact that 99.999% of flats are leasehold deters very few potential purchasers in the real world.

I would argue that in effect leaseholders routinely pay a 'freehold price' for all leases of 75-80 plus years remaining. I would argue that this is due to a combination of the education system, incomplete advice when they buy (from solicitors and surveyors, though clearly neither has a duty to fully advise them of every possible issue they could face during their period of ownership), general public ignorance and a shortage of flats.

[jeffrey]

You omitted to stress the responsibility of valuers and surveyors. It's upon them that P relies in offering a price.

[Richard Webster]

My angle is, if I buy how easy is it to sell?

I know by what Jeffrey says that leasehold flats (125 years doesn't sound like a long time to me) are commonplace, is the appeal (or lack of) of leasehold a major turn-off to a whole swathe of potential buyers, including investment buyers.

Of course the other turnoff is service charges.

I realise that the lease can be extended at some future time, at a cost and hassle.
__________________

If you are buying a flat then when considering saleability you have to distinguish between
a. the fact it is flat; and
b. the fact it is leasehold.

Some people do not like flats because they are too close to others and do not have garden and in some way have to contribute towards the cost of maintenance of the structure, insurance etc. This happens also where there is a commonhold (government attempt to legislate so flats could be "freehold" without a landlord in the normal sense) - if you can find one - very few have been created.

"Pure" freehold flats are a rarity, only mortgageable with a few lenders in Scarborough, and otherwise generally worth less than equivalent leasehold flats because of the problems with enforcing maintenance and repair etc.

So basically if you want to or buy a flat it is nearly always going to be leasehold. ("Share of freehold" still involves a lease.)

As has been mentioned, 125 years is the fashion at the moment. No magic reason for that - Barratts have built new locally with 155 year leases - or you could have 133 or 147 years or any other length just to be different!

Valuation is mainly about size, condition, location and facilities. Length of lease is rarely a factor unless it is known to be particularly short (say 70-75 years or less) where there will be some discount, but its amount will be subjective.

So I know of a case where a few years ago similar maisonettes built by the same builder, one with 75 years remaining and another with 975 years remaining were advertised at an identical price by estate agents. (I advised my client to buy the one with the longer lease!)

I agree with others and don' t think there is any valuation difference between 125 and 999 years as far as a flat is concerned.

[James 2009]

You omitted to stress the responsibility of valuers and surveyors. It's upon them that P relies in offering a price.

I did say solicitors AND surveyors.

However, I would stress that it is the job of a surveyor to comment upon MARKET value, and it is the MARKET that (IMHO) underprices the costs / hassle of leasehold ownership. [This could lead to a whole new discussion on the constant battle that valuers face, balancing reflecting the market with what is rational].

Nowithstanding that it would be helpful if all surveyors, at the time of valuation, included an essay discussing their theories on the general 'optimism' that the market displays when purchasing leasehold and that if they want to buy then they have to pay 'x' (market value) but that if they are rational they should pay 'x - y' (MV less the market's 'optimist premium'!)

Or would this just leave buyers even more confused?

Of course this reverses with very short leases whereby the market seems to offer 'MV with long lease - cost of extension - rational contingency - irrational fear factor'. (Of course one man's irational fear factor is another man's profit).