leasehold checks SPV buyers: 9 brutal pitfalls
Flats look simple. They aren’t. Leasehold checks SPV buyers must run can make or break a deal. Below are the nine pitfalls that most often wreck cash-flow or lending. Read them. Then run your rent test. Finally, buy only when the numbers and covenants support your model.
The 80-year trap (and marriage value)
Trigger: payment missed on Day 1.
Timeline: Day 1 friendly reminder → Day 4 firmer note → Day 7 plan offer → Day 14 escalation.
Artifacts: email scripts, call notes, repayment plan template, ledger screenshot.
Outcome: a dated promise or a documented breach. Therefore, you act fast and stay fair.
Toxic ground rent mechanics leasehold
Scrutinise amount, review formula and frequency. “Doubling” clauses every 10–15 years have been targeted by the CMA and forced out in many cases, but legacy leases still exist and can strangle resale and remortgage. RPI-linkage can also bite if reviews are frequent. Treat aggressive clauses as a cash-flow hazard.
Service charges that drift
Study budget vs actual, look for arrears in the block, and ask for sinking-fund statements. A weak fund plus an ageing roof or lift means a nasty levy later. Model realistic increases before you commit.
Section 20: the quiet budget bomb
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Diary: Gas, EICR, EPC, licensing, tenancy ends.
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Runway: start 60–90 days before expiry.
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Pack: ownership docs, insurance, certificates, licence evidence.
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Result: no last-minute panic. In addition, lenders and inspectors see order.
EWS1 and cladding reality
Qualifying works trigger Section 20 consultation. Bills over the threshold can be recharged to leaseholders—often at the worst possible time. Scan recent and in-progress S20 notices and minutes; if the works are coming, price them in.
Lettings covenants that block your leasehold model
Read user covenants. Some leases restrict AST length, short-lets or HMO use, or require consent to underlet. If consent is discretionary or slow, your void risk rises. Bake this into timelines and cash-flow.
Insurance shocks and “uninsurable” surprises
Check the policy schedule, claims history and any excess changes year-to-year. After major works or fire safety reviews, premiums can jump sharply. Stress-test at a higher insurance line to stay safe.
Freeholder and managing-agent performance
Minutes reveal culture. Are repairs closed on time? Are arrears rising? Do agents communicate well? A poor agent inflates delays and costs. If performance looks weak, raise your yield hurdle or walk.
The lender lens (and your DSCR)
Now run the rent test with lender realism. Start with gross rent (verified comps). Then subtract 10–15% ops/void buffer, service charge + ground rent + insurance, and a stress-rate mortgage (6–7% is a sober base). Your result must clear your target DSCR comfortably. If it doesn’t, pass. HomeOwners Alliance
Documents to demand on day one
Ask for: the lease (plus variations), management pack, accounts, insurance, recent minutes, Section 20 notices, EWS/cladding docs. If any stall, assume risk and reflect that in price—or paus
Local notes: Dartford & Gravesend leasehold
In Dartford, newer blocks can hide stiff ground-rent reviews—read the clause and timetable increases. In Gravesend, check service-charge budgets against recent works and confirm sinking-fund health before you model. Add headroom in winter and during refurbs.
Simple rent-test worksheet (do this every time)
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Gross monthly rent (evidence comps).
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Minus 10–15% buffer (ops/void).
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Minus service charge + ground rent + insurance.
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Minus mortgage at stress rate.
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Result ≥ your DSCR target? If yes, proceed. If no, renegotiate or pass.
SPV Rent Test (quick)
Checks if net rent covers a stress-rate mortgage and your DSCR target.
Note: This is a simple stress-test tool for guidance only. It does not replace lender underwriting or regulated advice.
FAQS
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No. They cover 80% of cases. Then you focus on the exceptions.
Sometimes. Valuers use RICS’ proportionate guidance; requirement depends on wall systems and risk, not just height. RICS
No. However, combine it with ageing fabric or lift plans and costs can spike. Model the levy. The Leasehold Advisory Service+1
Many have been removed via CMA action, but check the exact clause in your lease. Legacy problems remain. GOV.UK+1
Short lease near 80 years with poor rent mechanics, pending S20, and unclear EWS is a red-flag stack. Protect capital firs
