Monthly Property Advice
Charterhouse offer their expert advice...
Q. A friend of mine was recently gazundered. Can anything be done about this?
A. For those who don’t know, gazundering is the opposite of gazumping. It’s the name given to the practice favoured by some less scrupulous buyers of deliberately waiting until just days or even hours before exchange of contracts, and then suddenly reducing their offer. While gazumping is normally associated with a raging sellers’ market, when homeowners are more likely to be tempted by higher offers from desperate buyers, gazundering tends to happen in a slower market. Fortunately, it still seems to be relatively rare – although that is hardly any consolation. Of course, gazundering isn’t actually illegal. After all, it is one of the enduring eccentricities of the English property transfer system that nothing is binding on either party until exchange. Nevertheless, morally speaking, it is a clear abuse of that system. Gazundering implies a strong element of premeditation. In delaying to the very last minute before revising their offer downwards, gazunderers are
cynically counting on the seller being too heavily committed to pull out. In my view, this is utterly reprehensible. What if anything can be done about it? Well, although nothing can insulate you from the danger altogether, you can at least minimise the risk by using a reputable estate agent, who will thoroughly vet prospective buyers to establish their true financial position and level of commitment. Longer term, anything that can appreciably speed up the snail-like pace of our system for buying and selling property must be a good thing. After all, the quicker a sale progresses, the fewer the opportunities for such abuses.
Q. What factors do I need to take into account when buying leasehold?
A. Under English law, you can only have one freehold property on each piece of land - so leasehold was adopted as a way of getting round this problem in order to give flatdwellers a degree of security of tenure. With a lease, you are effectively a kind of tenant, having bought rights to a property for an extended period of time. As such you are bound by the terms of the agreement, which are set out in the lease itself – subject of course to the various statutory rules and regulations. One of the key things you need to consider is the length of time still outstanding on the lease. Anything less than 80 years and you would encounter problems if you wanted to sell. You are legally entitled to have the lease extended – as long as you have already held it for a minimum of two years. However, this comes at a price, since the relevant legislation entitles the freeholder make a charge for this by way of compensation for having to wait longer to get their property back. Another reason why the 80 year mark is so important is that at this point, in addition to the aforementioned compensation, you also become liable to pay the freeholder so-called “Marriage Value” – i.e. 50% of the increase in the property’s perceived market value due to the lease extension. Clauses in the lease concerning repairs, ground rent, service charges etc also require careful study. The key thing to remember about leasehold agreements is that while they all share certain basic elements, there is actually no such thing as a standard lease.