View more on these topics

Comment: Leasehold clients need extra care

Sally-Laker-MM-Peach-700.jpg

On leasehold properties, ensure the client fully understands the lease they are taking on – or they could pay a high price

Recently I found myself dipping into the world of leasehold properties, after a friend inherited her parents’ large flat in a much sought-after area.

The term remaining on the lease – not something she had ever thought to check – is only 45 years and leaves her with a depreciating asset, with an upfront cost of £35,000 to renew the lease. This is not an option financially so she is contemplating a potentially lower sale price to attract a buyer who can afford to renew the lease.

This reduces the number of potential buyers for the property because most lenders require 30 years remaining at the end of the term. Therefore, assuming a 25-year term, a minimum of 55 years would be required at the outset and some lenders require 70 or 85 years.

While cash buyers may be able to snap up a bargain, this case highlights the need to make sure the client fully understands the lease they are taking on, because there will be a high price to pay if they do not.

In 2015, 43 per cent of all new-build registrations with the Land Registry in England and Wales were leasehold, and 3,000 of those were detached houses. The minefield of service charges, ‘sinking funds’ (money charged separately and held for major works) and buildings insurance charges requires thorough checking on behalf of the client.

Clients have the right to request a detailed breakdown of the service charge and paperwork to support it, but there is no legal obligation to supply it. The landlord holds all the cards in agreeing to extend the lease and deciding how much to charge, although under the 1993 Leasehold Reform Act most owners of flats are entitled to extend their lease by 90 years at a “fair market price”, once they have owned the flat for two years

This is something to consider with clients who may be in a position to extend their lease now in order to protect their current assets, or even, as in this case, their future assets as part of a wider mortgage review.

Sally Laker is managing director at Mortgage Intelligence

Recommended

Andrew-Montlake-700.jpg

Market Watch: The seven-year fixed party

Coventry’s seven-year fix is both stunning and interesting, but what a shame stamp duty killed off its family mortgage Summer is a notoriously difficult time for the market, battling against a generally slower period. At least this year we have enjoyed the considerable highs of Team GB in Rio. And with football back on our […]

HSBC-Logo-Branch-Building-700x450.jpg
1

HSBC to sell through First Complete and Pink

HSBC is now selling its mortgages through the First Complete and Pink networks. The initial launch will give selected appointed representatives from both networks access to a dedicated helpdesk, HSBC’s underwriters and the full range of intermediary products. First Complete and Pink mortgage manager Karen Hedges says: “With the intermediary market changing, it is important […]

Buy-to-Let Watch: Clients need tax advice right now

Not all landlords are being advised correctly on the impact of the impending tax changes, which requires immediate action We recently hired an experienced case manager from a modest brokerage that undertakes some buy-to-let mortgage transactions. When asked how she was adjusting to her new role with us, she commented on our considerable volume of […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 

Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.

Newsletter

News and expert analysis straight to your inbox

Sign up