Buying off-plan – what to watch for in the lease
Q: Im buying off-plan a retirement leasehold property and would like to know if there are any particular issues I should be aware of before signing the lease? What I have so far from the developer is a one pager!
This information is good as far as it goes, but it is not good enough to lay down £500 for a lease that is as yet unseen.
It is astonishing that purchasers buy a flat off-plan without seeing the lease. The lease, or long-term tenancy as it is in law, is all they will own. It is a contract to occupy a certain space for a certain amount of time.
Our advice would be to get the full lease, read it fully and understand it, with professional help.
This information does not state what the ground rents are, although they are typically around £450 with this particular retirement housebuilder. It does say that the rents will increase with RPI after 15 years.
These are higher ground rents than would be seen in comparable non-retirement sites. There is no good reason for high ground rents in retirement housing, and consumers should object to them.
These ground rents will ensure that the freehold is attractive to investors when, or if, the retirement housebuilders sell it.
High ground rents mean that the freehold will have a lucrative income stream when the leases are extended (before they run down to 82 years). Sadly, owners of retirement flats notoriously fail to extend the leases, which contributes to their evaporating value.
Retirement housing can be a very worthwhile lifestyle choice, but it can also come at a very high price.
New retirement flats routinely plummet in value after sale and do not track the local property market. This means that once you buy you may not easily be able to move.
So, if it has not worked out this can be an issue. Similarly, if an elderly relative needs to go into further care, the flat can take time to sell and all its running costs will need to be paid.
Answered by Sebastian O’Kelly, Carlex