Leasehold Ideas

Hi Investors, just wondering if anyone has experience with Leasehold property??

Here’s the situation… My sister purchased a Leasehold property in Auckland a number of years ago to live in and continues to do so today. The problem is that the 21 year lease term reset a couple of years ago and the ground rent practically doubled. This is a common problem in Auckland with leasehold properties. I feel the lease terms and valuations are flawed but that’s a whole different discussion. So while pretty much every house in Auckland has doubled in value in the last decade, this particular property has in fact gone down in value and struggled to attract any interest. Since so many people have been burned by the leasehold issue, nobody wants to touch them. There are high profile cases of people walking away from their supposedly million dollar houses because they couldn’t afford the dramatic increases in ground rent (See http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11416989). So my sister is stuck with the house and struggling to pay the lease payments while going backwards as the rest of the market powers on. She has well and truly missed the boat and can’t afford to buy back into the market and is probably in negative equity already. Should she have sold out years ago? Probably. Should she have never bought leasehold? Probably. But that doesn’t change where she is today.

I would like to help my sister out of this difficult situation. She has tried to contact the leaseholder to purchase the land freehold but it is a complicated ownership trail involving the Dept of Conservation and Local Council, who have no interest in selling the title. The same issue applied to her neighbour, which was actually a church. They eventually did a deal with a developer to knock down the church and build a child care centre on the land and I feel the best solution lies somewhere along these lines.

The property itself is a 3 bedroom 1950’s bungalow with separate double garage and in ground swimming pool on a ~550m2 sloping site. It sits across the road from a primary school and a short walk to public transport and shops.

So, what could replace the house for maximum value? What potential commercial use for land opposite a school and next to a childcare centre?

Would appreciate some creative thoughts.

Cheers,
Simon