Buying A Leasehold Property |
Last week I inspected a beautiful apartment.
It had been refurbished to a very high standard a few years ago and has been kept in immaculate order.
Indeed, the refurb was probably too good for the property, but that is not where the owners have lost money. No, unfortunately, they made a massive blunder when buying the property because they clearly didn’t understand leases.
Please note that there is nothing intrinsically wrong with leasehold properties; I have owned several over the years. However, you do need to understand how to value leases and the basics of how they work.
In this instance, the property was on a 60 year lease when they bought the apartment for £3,220,000. Unfortunately, this was a record price per sq.ft. on the street despite the fact that all the properties that have sold for “high prices” have share of freeholds – and these “high prices” traded for 25% less than the record price per sq.ft. this family paid.
Now, as I have mentioned ad nauseam, price per square foot/metre comparators are a blunt instrument, but this gives you an idea of how far out the owners were when they bought it.
The property is now being marketed for £2.4m and will likely sell for c. £2.1m. That is a shocker even taking into account market conditions over the last ten years. So, it is vital that you seek expert advice when acquiring leasehold properties.
Of course, your solicitor should point out that you are buying a mid or short-term lease and that this will have implications – a point I made to the agent when he was telling me the story behind the property. And this is what he told me:
The owners had been represented by a “property consultant”. The agent thinks that the owners (who are not British) were advised by the solicitor to look at the cost of extending the lease and the valuation implications. However, he thinks they then spoke to the consultant who told them there was nothing to worry about and to proceed, i.e. he just wanted his commission.
This is nothing short of scandalous and infuriates me. One of the many problems with the UK property market is that it is very “lightly” regulated. Any halfwit and/or liar can set up an estate agency or buying consultancy and, disappointingly, many do. This is one of the worst examples I have heard although, frighteningly, some distance from being the worst but that is a story for another day.
So, some brief words of advice to ensure that you do not suffer the same fate as these poor people.
- Ensure that you use a highly regarded solicitor who specialises in London property.
- If they raise an issue, do not blindly trust a “consultant” whose commission is dependent on the transaction happening. It is a conflict of interest. Of course, my clients come to me with questions, but I arrange calls or meetings with them and the solicitors/tax advisers, etc. to discuss everything in the open. You should have a “buying team” who should all be independent but work together to ensure you achieve the best result
- When asking someone like myself to represent you, please ask for proof of past performance. I arrange for prospective clients to speak to past clients who have acquired multiple properties through me. I have also been doing this for over 20 years and can provide dozens of testimonials – not just from clients (who kindly include their names and will also be willing to speak to you) but from solicitors with whom I have worked for years. For example:
“He has proven that he can find good opportunities and negotiate significant discounts. I have no hesitation in recommending Jeremy as I know that my clients will receive the highest levels of expertise and experience a service which will remove all the normal stress, wasted time and money associated with acquiring a home or investment property.” Robert Brodrick – Partner – Payne Hicks Beach Solicitors
The simple fact is that most (not all) leasehold properties are good from a legal perspective. Indeed, far too many buyers limit their options by refusing to buy leasehold properties – probably because they have heard of horror stories like this one – but it is a mistake, especially as the law is changing to favour leaseholders even more.
So, if you are planning to acquire a home or investment in London and would like to discuss:
- Leases
- Accurately valuing property
- Tested & proven negotiation techniques
- How to gain access to the best off-market opportunities
Or any other questions you have about acquiring a property in London, you can request a free, 17 minute Strategy Session by emailing Dee, my assistant, at [email protected], clicking here or calling 02034578855 (+442034578855 from outside the UK).
Please note this is not a feeble disguise for a sales call. I will not discuss how I work during the Strategy Session – the focus is to discuss your plans and find your “blindspots”, so that you can avoid the seven most expensive mistakes London property buyers make, so that you don’t become an “estate agent victim”.
If you are planning to acquire a property between £1m to £100m, would it be a waste of your time to find out what these are?
So, to request your free, 17 minute Strategy Session simply email [email protected], click here or call 02034578855 (+442034578855 from outside the UK).
