Anyone bought leasehold?

[nickydwuk]

We have been scouring the real estate sites for houses in different areas. We have seen some lovely houses in our price range but they have had land that is leasehold. Has anyone bought anything like this? Is it risky? Can the owner of the land decide to cancel the lease before it has expired thereby leaving you with a house but no land? Just another option at present

[sleepy]

The attraction for many investors on lease hold land is that the properties are cheaper to buy because you are not buying the land. You pay an annual lease cost to use the land which is tax deductable and can make your overall cashflow on the property look quite attractive. However the downside is that these lease costs are renewed at certain intervals. You have no control over what these increases may look like in the future. A couple of more recent examples in Auckland are around the Viaduct area where many of the lease costs have recently almost doubled. Also in Greenlane a similar thing has happened and many home owners are struggling to be able to afford the new annual lease costs.

Your lease may include an option to purchase at a later date, so look into that. If you were going to buy a leasehold property you would need to get the lease thoroughly checked by a lawyer..
Be sure to check how long the lease has to run, your lawyer should ideally have everything ironed out before anything is signed.

As for selling the land, im not sure on that one ... but I reckon if you sign the contract to lease the land for say 10 years, then legally you should have the lease for 10 years, if the owner of the land wanted to sell the land, then the lease would need to part of the sale untill such time that the lease expires, the new owner may not then renew the lease if they have other plans for the land. (or alternatively might ask to buy the lease back from you so he could commence his plans).

Again, imnot an expert, or even particularly knowledgeable on these matters, so take anything I say with a large pinch of salt ... be sure to get everything checked by a lawyer, ask a lot of questions, and read the small print carefully before ever signing anything.

[ShellBda]

BermyGirl and I were originally looking at houses in Auckland and the majority in our price range were leasehold. The problem was that some of the annual leases were going to cost us NZ 48,000 per year! Add to that monthly mortgage payments and council taxes and we would have to earn a whole lot of money to be able to afford it. Also, a lot of the leases seemed to have a minimum of time left on the lease i.e. 10 yrs or 5 yrs for some. You have no control over what happens when the lease expires. It just didn't make sense for us financially. So, we decided to look for a home outside of Auckland and found more freehold properties for sale which is what we ended up with.

Shell

[Taffy]

This can also depend on who owns the land. In Hamilton, most leashold property is owned by the council, churches or iwi (local tribe). Generally you're quite safe in these instances, but buying leasehold is always going to be a risk as you never know if the land will be sold to someone who isnt quite so forgiving.