posted
Recently bought in Sharm (by deposit) at Sierra and Sharm Bride, and before I commit fully, I have attempted to get some clarification on exactly what could be the repercussions on only owning the leasehold.
I have trawled other threads but no-one seems to have nailed down exactly what disasterous consequences could follow in the future, and of course as important, is there anything at this stage that can be done.
I have suggested that it would be imperative to include at the very least "renewable extension" clauses in the contract, but my agent tells me that this is not possible. From my angle it looks like a win/win situation for the freeholder?
I believe as a group, we must be cautious, particularly before signing any contracts.
Allow me to describe how I understand it:
In Sharm only there is a govt policy to exclude foreign nationals from owning property. In order to get round this foreign nationals are permitted to take out a 99 year lease, with the developer being the freeholder.
Realistic Disasters?
1. The lease runs out after 99 years, we or our dependents own nothing - all investment is lost
2. The lease runs low, the value of the property is reflected in this, we need to extend/renew the lease back to 99 years, we approach the freeholder for an extension:
2.1 He tells us to take a running jump, he is happy to let the lease run its course
2.2 He demands an outrageous percentage of the then current market value (he has us over a barrel)
3. After a period of time (could be 6 months could be 20 years) the Egyptian govt decide to reinstate that foreign nationals can purchase property as freeholders; however there is no new jurisdiction to automatically allow the existing leaseholders to convert to freehold.
As a consequence we are all left with white elephants, the market value would plummet, as all new investors would only look at freeholds, or buy our properties at vastly reduced market value.
Has anyone any experience of modifying their contracts in order to fully protect themselves from the scenarios described above?
posted
hi, your right in saying no one has nailed it, but thier wrong in saying they wont remove it, yes they can, get them to remove the % of anything stupid, but if you have paid and signed then its another story
Posts: 1344 | From: uk/ | Registered: Mar 2006
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Key points in summary are that contracts need clauses that protect the leaseholders in all the scenarios as described above.
For each of the scenarios above what would you expect to do in order to protect your investment? Please advise,
Posts: 8 | Registered: Feb 2007
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posted
the lease should clearly state it is renewable all your cost should be stated at time of signing if your not happy before you sign then have them removed thier is many people i know who have had this done i would not go into putting clauses in to protect other clauses keep it simple
Posts: 1344 | From: uk/ | Registered: Mar 2006
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You can include in your usufruct agreement a clause with a conditions precedent (being the change of legislation to allow freehold for foreigners in said land) to a freehold for a predetermined amount of money. In other words it's an option to buy freehold that can be exercised upon the change of legislation within the leasehold term.
Posts: 88 | From: Khonfesharia | Registered: Jun 2004
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posted
hi mirox,not spoke with you for a long time now,hope you are well,thank you once again for your help when i needed it.
Posts: 117 | From: manchester uk | Registered: Jun 2006
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posted
Nagalka, I'm glad to be of help. I'm afraid I wouldn't go around looking for lawyers since I am one myself. The consditions precedent that you may have in your agreement is the simple contingency on the change of regulations and laws which would premit the lessee to own the property on freehold basis.
Ian, how are you my friend, hope life's treating you and the family well. Don't you intend to drop over for a coffee sometime soon? And, by the way,don't mention it friend. Take care and let me hear from you if you're going to be unable to drop by.
Posts: 88 | From: Khonfesharia | Registered: Jun 2004
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posted
mirox,i can promise you that when i am near cairo the coffees are on me,you helped me out a lot and i realy appreciate that.its nice to see that you are still helping people with good advice.see you soon my friend.
Posts: 117 | From: manchester uk | Registered: Jun 2006
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