In theory reserve funds etc should prevent surprise bills, but that isn’t always a guarantee.

For those not familiar with how flat purchases work in the U.K. We have a crazy system where people purchase “long-leases” for their flats, you don’t own the flat, your just renting it for a long period of time (normally 99 or 999 years depending on your landlord). When you sell your flat, you’re just selling the remaining period on your lease (the 99 years doesn’t reset). And yes this does mean that once the lease expires you no longer own your flat anymore, there are ways of purchasing extensions etc but it’s a bit much to put into a HN comment.

That sounds like real estate in China: the government owns all the land, but sells "land use rights" that last for a maximum of 70 years.

https://en.wikipedia.org/wiki/Chinese_property_law#Procedure...

The original idea was a Georgism-inspired approach to capturing land value increases through rent to help fund the city's development, but nowadays it functions effectively like freehold, as most lessees do not have to pay anything other than nominal rent, and you can renew your lease effectively automatically every 99 years, with the added interesting complexity that the government uses additional lease clauses as a form of planning controls.

Imo, it's a good thing, since that mandates that the local municipalities have to keep maintaining the standards for the provision of services in areas with limited leases. On the other hand, areas with hands-off sales usually have very shoddy local services and shit maintenance.

My parents live in a relatively cheap area in a Middle Eastern city, where you can't buy the property, but only lease it for 99 years, yet the services there are far better than those in the more "glitzy" uptown areas with more expensive flats. It was the same story when I was flat-hunting in Singapore - locals prefer living in the HDBs while renting out the freeholds.

1) a one off fee for the actual lease, for a 125(typically but it can be 999 years for private leaseholds, and <10 for commerical property) year term. This is normally 10-70% of the going rate for a similar freehold property.

2) each year for the "ground rent" ie a "pepper corn" or nominal fee to the person who actually owns the building (this is nominally fixed at £1-100, but in some recent scams they are exponential)

3) "reasonable" maintenance. this is normally paid to either the council for a ex council house, or a management company. They may not be the same entity as the freeholder. You cannot be compelled to pay for "improvements" only reasonable upkeep.

Once you have a leasehold, it is tradeable like a freehold.

This isn’t true. Your landlord has a legal obligation to offer a renew at a fair price (method of calculation is laid out in law). But they have no obligation to actually renew if the leaseholder doesn’t make them. Long leases can absolutely expire, doesn’t happen very often, but it’s certainly not impossible.

I don't understand your point. My understanding is that if there is more than 21 years left on the lease the landlord has zero recourse to not give you a renewal of, I think,50 years, and if you apply for it and they fail to respond it renews automatically.

Most people facing this will engage long before 21 years as well

We’re not actually disagreeing here, I just found your original comment ambiguous.

> give you a renewal of, I think,50 years

Based on what my solicitor told me, I think you get a 999 year lease with peppercorn rent. But I could never find source for that.

So if the leaseholder is bot cooperating it can get very expensive. If the lease goes below 80 years even more so.

Who owns the flats then? A lease of 99 years with rent I would assume easily covers the outright cost of the flat. Seems crazy to me that this system continues to function.

The building owner (freeholder), who is normally also the superior landlord.

> A lease of 99 years with rent I would assume easily covers the outright cost of the flat.

You pay annual ground rent, UK law means that this is pretty much capped to £250 per year outside of London, and £1000 per year in London. Most ground rents are below that (£30-£100 per year outside London, £200-£500 inside London).

So for most leases the ground rent over the lease period doesn’t even come close to the premium (the amount paid the purchase the lease, or what most people would call the cost of the flat).

If you do a statutory lease extension (which costs money), then the lease is extended to 999 years, and the ground rent drops to a peppercorn (another bit of crazy English law https://en.m.wikipedia.org/wiki/Peppercorn_(legal) ).

There are some projects of laws to remediate this mess, but this requires to overwrite private contracts, something gvts have been reluctant to do so far.

You don't pay rent to the freeholder, but you do pay "management fees" which are supposed to cover insurance and "admin." You may also pay "ground rent" which is a small-ish fee to cover use of the land on which the building stands.

In reality freeholders often do a deal with insurance companies. They get insurance at a reduced rate and don't pass on the savings to leaseholders. There are various other scams that can make leaseholding a nightmare.

This is all completely unrelated to renting. As a leaseholder you're an owner, for varying values of "temporarily".

If your flat has a 999 year lease you can easily sell it on or if it has a share of the freehold.

If it's <99 years nd there's no share of the freehold it gets harder to sell. And by the time you get to <50 years you're going to have serious problems selling it, unless it has some outstanding features or benefits to compensate or you're in a market segment which is happy to treat the money as a simple rental (which does happen, especially at the high end).

I don't really see what the issue is, it's just another option. You can buy a freehold, a leasehold for typically a kiloyear new or whatever remains (which will be accordingly cheaper), or rent.

Edit: sorry, in Scotland it is called freehold or feuhold not commonhold but could be considered equivalent. I believe commonhold is also used in the US.

In fact, I propose that we incorporate this system at a larger scale in the USA.

Housing obtained at subsidized rate shouldn’t be treated as a speculative asset as the people signing up will likely never qualify for housing loans, normal interest rates or even have the ability to put down down payments. Especially in desirable areas. The goal is to provide stable affordable housing for those who are housing insecure. The market place has been made accessible to them for habitat and not to get an unfair advantage as a speculative play.

Do you have any source where I can look at the numbers?

ETA: the same system here in the us is called BMR or below market rent apartments. It’s not social housing or section 8. There are also 55+ only senior communities to assure that seniors are not priced out due to housing insecurity/eviction threats.

The government does sell leaseholds of their home to council tenants through the right to buy scheme, but in general leaseholds are not a government scheme: they are sold and bought between private parties.

In the past I understand that a significant percentage of the UK population used to be council tenants but the through the right to buy scheme the government got rid of a lot of housing stock and it only replenished a fraction of it.

"Purchasing" one of these "long-leases" strikes me as doublespeak, a gimmick no different from prepaying 99 years of rent. Ownership doesn't expire.

Why on earth would one do this?

Condominium ownership required specific legal authorization in the U.S., which only happened mid 20th century. Before that there was no way to have different people owning different units in a larger building. The closest thing to it was a cooperative, in which you also don't really own your unit as real estate, although it isn't quite the same thing as a UK leasehold, it overlaps.

So, the UK didn't even pass similar legislation to legalize a condoninium-like ownership structure ("commonhold") until the 21st century. And it's still not quite the same. And for whatever reasons hasn't taken off much, maybe because the leasehold system was already so developed at that point. Switching over ownership structures in existing properties is of course a big hassle (why are there so many more cooperatives than condominiums in NYC, even decades after condos were legally authorized? that's part of it)

So, people do it, because that's what evolved from the particular historical and political context to allow "ownership" of an apartment in a building. There's noting "natural" about condominiums, they needed specific legislation to make them possible in the USA too.

In the context of council estates specifically, well there's a bunch more historical and political context. Land ownership and tenure is a social and political construct, it isn't "naturally" any particular way, it turns out.

There’s no real alternatives (other than living on the street). Why would builders and landlords give up such an obvious advantageous arrangement?

People are pushing for change, common holds are slowly becoming a thing. But ultimately there’s a housing shortage in the U.K, and beggars can’t be choosers. It sucks, but you can’t argue with reality.

> "Purchasing" one of these "long-leases" strikes me as doublespeak, a gimmick no different from prepaying 99 years of rent. Ownership doesn't expire.

It’s just like purchasing a future, or any other time bounded asset. Your purchasing the opportunity in a manner of speaking, your ownership of the lease never expires, it just becomes worthless after 99 years.

More typical might be you buy somewhere with a 550 year lease, and sell it ten years later with 540 remaining.

Clearly that barely had an impact on the value; probably it appreciated in value over that time, judt not quite as much as a comparable freehold.

https://www.gov.uk/leasehold-property

An outcome from Grenfell is the government is considering mandatory sinking funds.

14 flats were "privately owned" which is code for "right to buy" leaseholds (normally 125 years)

You are correct the renters are not liable for the cost of repair directly. The council pays on their behalf. Through a huge bureaucratic process the council then gets a settlement from the government.

Council Tenants rent the flats/houses with basic furnishings (ie kitchen with cooker and bathroom) all of which can be (but not always) repaired by the council.

Council Residents have a long term leasehold, and only have the right to windows, doors and the walls. Everything else they have to look after.