999 Years Leasehold Property

[chrisgoh]

Came across a 999 years leasehold property.

Is it almost the same as freehold as it will take 10 generations to live 999 years! Who knows what will happen then. Are there any limitations in terms of mortgage loan restriction, hidden cost and resell for 999 years leasehold property?

Thanks in advance!

[nicko54]

A few properties in Auckland are like this. I sold one earlier in the year. I did not have any issues with a mortgage when purchasing but the lease term was 990 years remaining! I did get a registered valuation before selling and because it was leasehold (even with such a long term) it was valued at less than if it was freehold. Not hugely but still has an impact according to the valuer.

[chrisgoh]

Thanks Nicko54.

It explains why the new QV of the 999 leasehold property is very much less than the asking price. The lower valuation will affect the mortgage loan as well.

[Maccachic]

What's the contract like in regards to lease payments and reviews.

[nicko54]

I would be sceptical about buying leasehold again even with a 999 year lease. It will always put off a few buyers so just a headache you can avoid. It all depends on your strategy but there are plenty of freehold options to choose from.

[Rosco]

Came across a 999 years leasehold property.

Is it almost the same as freehold as it will take 10 generations to live 999 years! Who knows what will happen then. Are there any limitations in terms of mortgage loan restriction, hidden cost and resell for 999 years leasehold property?

Thanks in advance!

From a pure numbers perspective, what is the cost of the lease vs the lower value? ie you might be getting the property for $200k below freehold value. So saving $12k in interest, and the lease might only be $8k per year. If the lease was more than the interest savings, then why would you do it?

I worry about the capital gain, and the difficulties to sell with leasehold properties. Many investors and owners wouldn't buy them, so this will reduce your upside.

The only time I would look seriously at a leasehold property is if the cashflow was awesome!

Ross

[Champion78]

So is this the same as crosslease? Or something else?

[ATandGT]

A 999 year lease is just a simple cross lease

[Maccachic]

A 999 year lease is just a simple cross lease

Would it not have a lease payment of some description?

[eri]

Would it not have a lease payment of some description?

no

my understanding is that it's basically the way freehold flats were setup in the 60's

[chrisgoh]

From a pure numbers perspective, what is the cost of the lease vs the lower value? ie you might be getting the property for $200k below freehold value. So saving $12k in interest, and the lease might only be $8k per year. If the lease was more than the interest savings, then why would you do it?

I worry about the capital gain, and the difficulties to sell with leasehold properties. Many investors and owners wouldn't buy them, so this will reduce your upside.

The only time I would look seriously at a leasehold property is if the cashflow was awesome!

Ross

Thanks for the advise Ross.

[chrisgoh]

My bad, the agent told me it is the way crosslease is done. The title is actually freehold.

[flyernzl]

Yes, I have a few of these.

The legal fiction is that each of the owners of the 999 leases jointly own the freehold title of the land.
They then lease the bit they occupy from the joint ownership, as do the other occupiers - hence the term 'cross-lease'.
So, as each owner ( 2 or more ) benefit equally by their right of occupation they do not make any payments to the group.
I understand that this form of title dates from when councils would not permit freehold sections of 400sq.m or so.

The only downside is that if you propose to ammend the footprint of the buildings that you have on your bit (eg add a garage, extend the house) you need to get the permission of the other owner(s).

[chrisgoh]

Thanks Flyernzl, very well explained

[eri]

yes they are very static because of the cross lease rules but basically freehold

i know of a 60's apartment building with 80? apartments and 20? carparks

the original 'ownership' agreement allocated the car parks to 20 of the apartments

1 owner without a car park found an owner with an unused space and offered to buy it

however it seemed the entire 'ownership' agreement would need to be rewritten for this to happen, expensive, with all owners agreement needed

- not impossible but then 80 owners may want to haggle about 80 other things....so the idea was dropped