mortgage on leased land?

[BrettW]

Hi all,

 

Just a quick question although I should be gifted land by my parents my father has raised the idea of 'leasing' me the land (say a 1000 year lease), does this make a difference with regards to getting a mortgage to build on it? Would the bank still lend based on the value of the land? For example a lender has said they would lend up to 85% of the value of the land if it was gifted to me? Would they still lend me to me on that basis if I was leasing the land?

 

Thanks all.

[ProDave]

I would turn the question around and ask why does he want to lease the land to you rather than gift you the freehold?  What does he hope is the advantage to a lease?

[BrettW]

23 minutes ago, ProDave said:

I would turn the question around and ask why does he want to lease the land to you rather than gift you the freehold?  What does he hope is the advantage to a lease?

 

Hi Dave,

 

To be honest he hasn't gone into to much detail but im pretty sure to be seen as being fair because i'm 1 of 6 children! Im the only one who is in a position to do this, so wants to be seen as being as fair as possible, maybe on his death i get the freehold and my siblings get my share of inheritance, no idea what his thinking is at the moment, all assumptions, i think if leasing means i can't get any of the land value would mean gifting the land and we have a separate agreement between us siblings, who knows, so in my head it might be ruling out the idea of leasing the land so he can say he tried that angle...not sure if any of this makes sense!

 

Must admit im not sure of there is any immediate benefit of him leasing me the land as you say?  Unless its so he can say to my siblings he hasn't given me the land, plus he wont be helping me financially with the build either...

 

Cheers

Edited July 30, 2019 by BrettW
mistake

[ProDave]

I can't see what he hopes to achieve. If he has leased the land to you on a 1000 year lease he can't then gift it to anyone else. 

[Ferdinand]

If it is to do with being perceived to be fair ... agreed a very good objective ... then I suggest a better vehicle would be for him to write his will now, and giving copies to everyone. But making it clear that it is *his* decision first. Then you could be disinherited of everything else  ?.

 

You could have an understanding that you will be more responsible for caring as a quid pro quo.

 

But tbh if it causes severe problems then it means that it is s waking up sleeping dogs, and they would awaken at some stage anyway.

 

IMO whatever is put in place now will be effected by ‘events’ .. so the important thing is to accept that that will happen and decide no one will resent it ie love over money. If you accept this as your lot, then you lose out if he finds a Faberge Egg in his attic and all the rest share it. Alternatively he could be repossessed and you are the only one with any value left.

 

Best of luck.

 

F

Edited July 30, 2019 by Ferdinand

[nod]

Ultimately you won’t get a mortgage or loan against land that doesn’t belong to you 

So it may be less complicated than he thinks 

Gift it to you or not 

[ProDave]

4 minutes ago, nod said:

Ultimately you won’t get a mortgage or loan against land that doesn’t belong to you 

So it may be less complicated than he thinks 

Gift it to you or not 

Plenty of people get mortgages on leasehold houses and flats.

[BrettW]

Thanks @nod & @ProDave this is where its not clear, worse case if i cant borrow against the land my father will gift it as its quite reliant to help kick of the build but dont want to rule leasing out..

[nod]

57 minutes ago, ProDave said:

Plenty of people get mortgages on leasehold houses and flats.

I think originally he was looking to use the land as a deposit 

Buying a flat or a house leasehold would be totally different 

 

[PeterW]

So the maximum lease is 999 years - and you could mortgage 

 

The issue is “the other 5...” who could cause you real problems when your father dies. As it stands, the land is let’s say worth £50k, and your father has £250k of additional assets. Easy split, you keep the land, your siblings split the assets and everyone is happy with each getting £50k. 

 

Fast forward 5 years, you’ve got PP and built a house on that land. It’s now worth £140k due to the increase in value from PP, and the estate is now worth £390k. In an equal split, each should get £65k, but in reality it looks like you get £140k and the rest get £50k each ... so are you now going to put your hand in your pocket to the tune of £75k to equalize your gain to their loss..??

 

With a lease, it’s still his asset, and that is where the complications start. He needs to update his will accordingly and make it clear who is getting what and agree that now while everyone is still alive ... 

 

 

 

 

[scottishjohn]

sounds like a real mine field 

we all know what happens with relations when there is a death and money 

 

so what about a deferred sale of this land  at an agreed value now -payable to his estate on his death  and you would need to get all siblings to sign up now to this agreement or there will be a contested will if  it is preceived by the others that you have robbed them .

If you think he will live more than 7 years then he can gift it too you --but same again you would want a legal doc that others sign to say they understand this 

time for some legal eagles

 

 

[Temp]

A property with a 999 year lease is normally worth virtually the same as a freehold property. So if he gives you a 999 year lease he is essentially giving you near the full value of the land. I'm pretty sure that's the way HMRC would see it. Its certainly the way mortgage companies normally see it.  If you look at the typical cost of buying the freehold of a flat with a  999 year lease its <£5,000.

 

I don't see any advantage of him doing this on a leasehold basis. 

 

Edit: The recent scandal about builders selling houses leasehold is due to the T&Cs they put in the lease about ground rent. Some of them double every 10 years.

 

 

 

Edited July 31, 2019 by Temp

[recoveringbuilder]

When we were going to build our first house on land belonging to my mother in law and her brother they were going to gift it to us however our solicitor was not happy with this arrangement as he could foresee problems further down the line with my husbands two brothers, so it was agreed that we would buy the land at a nominal fee, as it stood it wasn’t worth a lot without the pp so we paid the nominal fee. Many years later one of the other brothers was gifted a piece of land from them and at the end the remaining brother managed to get the two oldies to leave him everything else, farmhouse, land and another house because of dementia and a bent lawyer we ended up getting nothing else other than the land we’d paid for, 

where money and property is concerned people change!