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A house buyer in Coventry has pulled out of buying a “virtual freehold” Persimmon new build because it is being sold on leasehold tenure.
The four-bedroom Persimmon property was priced at £219,995, and has £150pa ground rent that increases every 10 years with RPI.
“It is available to purchase with the Help To Buy scheme,” said the buyer.
The buyer was told that he could buy the freehold in two year’s time and that it would cost £5,000 to £7,000.
Of course, there is nothing to stop Persimmon selling the freehold at any point to their customers. It is simply more profitable to offload them onto their regular investor clients.
Persimmon’s slogan is “Together, we make a home”.
Which might more accurately be:
“You get a long tenancy (with a leg-up from taxpayers thanks to the Help To Buy scheme), and we flog a long term investment asset class at your expense.”
Persimmon sales staff were describing leasehold houses as “virtual freehold”, which is a term increasingly used by housebuilders’ sales staff to describe leasehold houses.
The term is misleading and should be reported immediately to the Advertising Standards Authority and to the housing minister.
The would-be Persimmon purchaser was recommended to use QualitySolicitors Davisons for the conveyancing.
LKP advises: In any property purchase a recommendation by the seller to use a certain firm of solicitors is, IN ITSELF, a reason not to use that firm.
It is also the case that in leasehold conveyancing, buyers need more thorough legal advice than with a freehold purchase.
The most valuable advice solicitors can give a buyer is: Don’t touch this one with a barge pole!
It should have been given by the solicitors who landed buyers of Taylor Wimpey properties with doubling ground rents.a
The Coventry buyer wrote to LKP: “Thank you so much for the work you do in enlightening and bringing these activities to light. How else would a first time buyer and a novice too have known all these?
“With your permission, I will like to forward this correspondence to MPs for Coventry.”
Related posts:
Dear Jeffrey Fairburn … Can I buy the freehold to a Persimmon house before you sell it to anonymous investors, please?
No van man here: Persimmon bans first-time buyer from parking his van at his leasehold house
Leasehold house owners thank Brokenshire after Persimmon sells freehold to leasehold house for less than £3,750
Buyers walk away from toxic Persimmon leasehold house
Furious Persimmon leasehold house owners at Harrow View West demand their freeholds
Beech Developments sets off customer mutiny in Wales with grasping ground rents
£150 linked to inflation every 10 years….
Why on earth would you pull out….madness
For information purposes.
The average RPI over the last ten year is around 3% pa.
In the recent years it is down to 2.5%pa
So a £150 pa ground rent now ten years old would increase to £195pa
On current RPI increases in another ten years it would be £244pa.
This makes the cost of £5000 to £7000 to purchase the freehold seems expensive. At that rate of increase on the Ground Rent. it would take 34 years for the freeholder to recover £7000.
As a comparison the cost of extending a lease (using a lease calculator) is as follows. Which I assume results in a peppercorn rent.
Value of property £200000
Lease period remaining. 125years.( If it was a 990 years remaining it may be much cheaper).
Ground Rent. £150
The estimated premium is between £2500 and £3000.
So is it a better option to extend the lease, even on 999year period.
Can this be done?
Any suggestions?
MH, if the GR was the ONLY thing to take into consideration I can see where you are coming from.
However it is not just about GR is it. See my reply to “Michael”
I appreciate that the best advice is not to buy a leasehold house, I was thinking of the cheapest way to avoid paying the escalating Ground Rent for those who have already purchased. eg. by extending the lease and paying Peppercorn rent.
Would not the Landlord lose interest in the property if there was no GR coming in.
TW , Persimmons,Bellway etc must be selling off these freeholds in bulk quantities all over the country.
Would the companies who buy them be bothered to check if alterations or extensions were being made to individual houses.
Michael, you say “£150 linked to inflation every 10 years…. Why on earth would you pull out….madness”.
Michael,, its not just about ground rent. Even if GR is acceptable it is still no go.
The sensible buyer will have pulled out because it was leasehold.
Along with leasehold comes scam after scam. Like being charged 2 to 3 thousand pounds by the landlord for permission to erect a conservatory, The list and costs just escalate.
Only in rare cases do houses have to be leasehold.
Other than these rare cases others are sold leasehold purely for landlords and managing agents to make extortionate amounts of money out of the leaseholder.
Leasehold has now become even worse than it was years ago, when it was a static amount for the whole term,
Builders/Landlords doubling GR every 5 0r 10 years, or, at a minimum, increasing GR every few years by RPI increase
The bottom line is never ever buy a leasehold house – there is no need to
Although you are right about never buying a leasehold house, no matter the Ground rent terms, the reality is: there is a housing shortage and people have to live somewhere. If you don’t buy it someone else will. And very few people are educated in leasehold /freehold scams to avoid. Speaking for myself I had no idea till I started reading this website.
A few years ago, most leaseholders would have been completely isolated and clueless as to what to do.
I agree with you Leaseholder. Legislation must be implemented to prevent greedy dishonourable developers selling off Freeholds to Rachamanist Spivs. Notice that this disgraceful practice has become more prevelant as the housing shortage increases. These Spivs/ Rogues In Brogues prey on the vulnerable and naive- It is despicable ! They MUST be held to account and they will be….
Kim
I totally agree with u. And I pray they r held accountable for this mess we r in.