Leasehold purchase

Press, 4 May 1978, Page 10

Leasehold purchase

Some times lessees are given the opportunity of purchasing the leasehold sections on which they have built their houses, and thus making their land freehold. Most of the people wh.o have built on leasehold land have done so because they have found advantages. But there are also some disadvantages. Some of the larger cities in New Zealand have considerable areas of land owned and leased out by local bodies, trusts and church groups which depend upon these properties as investments. Many of the residential leases are not far from central city areas and are offered to lessees (tenants) with right of renewel in perpetuity. This is known as a Glasgow lease under which the rent was and, in some cases still is, reviewed every 21 years, but not at lesser intervals. In recent years provision has been made for more frequent reviews if the lessor (owner) desires. In a period pf 21 years land values can rise en-

ormously. By the same token when the end of the period c.*,aes in sight the rentals become very low in comparison with what could be expected on prevailing property values. Then, when leases are reviewed at the end of 21 years, the lessees are usually shocked when asked to pay a steeply increased rent. One advantage of building on leasehold land is that the lessee is able to put more money into his house because he does not have to make provision for the purchase of the section. One disadvantage is that mortgages on leasehold land are more difficult to secure than on freehold land. Buying the leasehold after a number of years would suit some people who in the meantime have improved their financial situations sufficiently to consider a reasonable price for the freehold. Before a lessee accepts an owner’s offer to permit the freeholding of the section, a registered valuer should be caned in.