The risky business of investing in leasehold land

Home/Blog, News, Property Law/The risky business of investing in leasehold land

We regularly warn clients about the risks of purchasing leasehold land, even if it seems affordable at the time there is the danger that this could change drastically come the next rent review.

The dangers of purchasing leasehold property have again been highlighted in the media this week with apartments at Scene Three on Beach Rd in Auckland City facing an increasing of ground rent of 470%. This means that owners of a small one bedroom apartment who were paying $1400 per annum could now be paying $8000 to the Ngati Whatua o Orakei Maori Trust Board who own the land. See this NZ Herald article for more details.

It does not surprise me to learn that over 80% of the owners of Scene Three are foreigners as locals are quite wary of leasehold city apartments. This story is not a new one, on the contrary, every few years when a major buildings rent review comes up the same scenario appears in the papers. The last one I remember is the Beaumont Quarter situation in 2008 where the average ground rent was increased from $4000 to $21,000. This saw property values hit rock bottom with one apartment reportedly bought for $350,000 selling for at auction for a mere $58,000 after the rent review.

It is not only city apartments that are at risk, there are pockets of leasehold land scattered around the country. Another well publicized example is the 100 plus sections around One Tree Hill which are owned by the Cornwall Park Trust Board. In 2005 many of these had a ground rent review and many faced massive increases of around 750% because the ground rent was based on a percentage of the land value.

Do you want to buy leasehold? Talk to us first – call O8OO SOLICITOR

2017-06-27T11:18:49+00:00 Blog, News, Property Law|