Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Kirri
    • By Kirri 23rd Aug 17, 10:01 AM
    • 6,104Posts
    • 20,526Thanks
    Kirri
    Value of freehold vs leasehold flat?
    • #1
    • 23rd Aug 17, 10:01 AM
    Value of freehold vs leasehold flat? 23rd Aug 17 at 10:01 AM
    I have the option to buy the freehold for circa 5k on a small flat, 95 years remaining on the lease and have a few questions on whether to go ahead..

    Any idea how much more it would be worth when selling the property or much the same?

    Is the value mostly in avoiding cost of lease renewal? how much is that if done individually approx??

    How low does the lease have to get for it to become a problem to buyers? i.e. I will probably be moved from the flat within 10 years max anyway and would still have 85 years left by then.
Page 1
    • Daveahare99
    • By Daveahare99 23rd Aug 17, 11:03 AM
    • 36 Posts
    • 16 Thanks
    Daveahare99
    • #2
    • 23rd Aug 17, 11:03 AM
    • #2
    • 23rd Aug 17, 11:03 AM
    If you purchase the leasehold you can extend the lease to your desired term. I thinks you can go up to 999 years or something like that.

    In any case if you moved out after 10 years in order to sell you probably wouldn't see a significant drop in value. The difficulty with freeehold is that it is geared towards cash buyers. However if you bought it and looked into extending the term (if necessary) I am sure you could make it work in your favour. When you buy and extend (particularity for flats) it makes it a more attractive proposal for mortgages lenders/buyers.

    Based on a 200k flat it would probably cost 7.5 k inc fees to extend for another 90 years and only add a couple of thousand in value.

    However if you were to have 85 years which is about average I just can't see it affecting the buy price that much. Anything above 80 years left is usually safe.

    You just have to weigh it up closer to the time I think.

    Hope it helps.
    • eddddy
    • By eddddy 23rd Aug 17, 11:20 AM
    • 5,122 Posts
    • 4,775 Thanks
    eddddy
    • #3
    • 23rd Aug 17, 11:20 AM
    • #3
    • 23rd Aug 17, 11:20 AM
    I have the option to buy the freehold for circa 5k on a small flat, 95 years remaining on the lease and have a few questions on whether to go ahead..
    Originally posted by Kirri
    The entire building will be one freehold property. Each individual flat in the building will be leasehold. So...

    Are you being offered the freehold of the entire building for £5k?
    (i.e. You will be the freeholder of all the flats.)

    Or are you being offered a share of the freehold for £5k?
    (i.e. you will jointly own the freehold with all the other leaseholders. This is often called "Share of Freehold".)

    The implications and responsibilities of these 2 options are very different.
    • Kirri
    • By Kirri 23rd Aug 17, 5:39 PM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    • #4
    • 23rd Aug 17, 5:39 PM
    • #4
    • 23rd Aug 17, 5:39 PM
    Thanks for replies

    Sorry, I mean a share of the freehold, most of the leaseholders are getting together and buying it. But tbh the other leaseholders who do 'right to manage' are a money grabbing lot and a nightmare to deal with.

    Also with 'the difficulty with freeehold is that it is geared towards cash buyers' do you mean a freehold flat is less attractive to the majority of buyers??

    I'm beginning to think it's not that beneficial to me, i.e. 5k now for no real difference on flat value if I sold. But bit cheaper to pay 5k now than 7.5k in 10 years time if I wanted to extend the lease but sounds like I probably won't really need to extend the lease to sell even then. I'm struggling to see much advantage for me in going ahead?
    • steampowered
    • By steampowered 23rd Aug 17, 5:41 PM
    • 1,681 Posts
    • 1,610 Thanks
    steampowered
    • #5
    • 23rd Aug 17, 5:41 PM
    • #5
    • 23rd Aug 17, 5:41 PM
    In 10 years time, it could be £30k rather than £5k.

    It all depends what the freeholder would accept at the time. Closely read the 'ground rent' provisions in your lease to see what those are worth.
    • Kirri
    • By Kirri 23rd Aug 17, 5:46 PM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    • #6
    • 23rd Aug 17, 5:46 PM
    • #6
    • 23rd Aug 17, 5:46 PM
    In 10 years time, it could be £30k rather than £5k.

    It all depends what the freeholder would accept at the time. Closely read the 'ground rent' provisions in your lease to see what those are worth.
    Originally posted by steampowered
    So could the freeholder (i.e. the other leaseholders now once they own it) basically charge what they like if I wanted to increase the lease at a later date?

    The ground rent in the lease seems to be ok, it's set very low and don't think due to change for another 25 years or something like that and even then staying very low.
    • steampowered
    • By steampowered 23rd Aug 17, 6:31 PM
    • 1,681 Posts
    • 1,610 Thanks
    steampowered
    • #7
    • 23rd Aug 17, 6:31 PM
    • #7
    • 23rd Aug 17, 6:31 PM
    So could the freeholder (i.e. the other leaseholders now once they own it) basically charge what they like if I wanted to increase the lease at a later date?
    Originally posted by Kirri
    Basically, yes. You can challenge them through a Tribunal but that does not guarantee a reduction and is expensive.

    The ground rent in the lease seems to be ok, it's set very low and don't think due to change for another 25 years or something like that and even then staying very low.
    Fair enough then ... if the ground rent is very low that reduces the value of the freehold.
    • eddddy
    • By eddddy 23rd Aug 17, 6:45 PM
    • 5,122 Posts
    • 4,775 Thanks
    eddddy
    • #8
    • 23rd Aug 17, 6:45 PM
    • #8
    • 23rd Aug 17, 6:45 PM
    But tbh the other leaseholders who do 'right to manage' are a money grabbing lot and a nightmare to deal with.
    Originally posted by Kirri
    So the leaseholders already have the 'Right to Manage'?

    In that case, you already have access to a lot of the benefits that a 'Share of Freehold' normally brings. (Decisions about maintenance, granting consent to sublet etc.)

    In what ways are your fellow leaseholders money grabbing and difficult?

    I'm struggling to see much advantage for me in going ahead? [with buying a share of freehold]
    Originally posted by Kirri
    The advantage will be that you and your joint leaseholders can agree to vary the leases in whatever way you choose. (But all leaseholders would have to agree.)

    e.g. Extend the term to 999 years, reduce the ground rent to zero, allow/ban pets, allow/ban subletting etc.

    Also with 'the difficulty with freeehold is that it is geared towards cash buyers' do you mean a freehold flat is less attractive to the majority of buyers??
    Originally posted by Kirri
    That advice is nonsense.

    You would own a leasehold flat plus a share of freehold. Most buyers see that as desirable - and getting a mortgage isn't a problem.

    But don't call it a freehold flat, because it's not, and that will confuse people.



    Edit to add...

    But the really big potential problem is that all the leaseholders (joint freeholders) have to agree on stuff.

    So, for example, if some of your fellow leaseholders are 'fools' - you might find it very frustrating.
    Last edited by eddddy; 23-08-2017 at 6:50 PM.
    • Kirri
    • By Kirri 3rd Sep 17, 10:26 AM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    • #9
    • 3rd Sep 17, 10:26 AM
    • #9
    • 3rd Sep 17, 10:26 AM
    So the leaseholders already have the 'Right to Manage'?

    In that case, you already have access to a lot of the benefits that a 'Share of Freehold' normally brings. (Decisions about maintenance, granting consent to sublet etc.)

    In what ways are your fellow leaseholders money grabbing and difficult?

    Yes they have RTM. I probably wouldn't have voted for it had I known how unprofessional they would be.

    The leaseholders who are now directors use their flats for BTL, they already own freeholds for other blocks where they own flats, they don't live here obviously so don't deal with issues that are day to day problems and have awarded themselves the contracts to manage things like gardening and cleaning too. So from the service charge we pay them for the contract to do the work, they contract the work out (have admitted paying cash in hand) and so they take a cut of the work and we get sub standard work done paying far more than we need to. If I question anything they take it personally.

    Also work only gets done on things that benefit them, not the overall residents, i.e. they build lock ups on the land but don't let other leaseholders have access. They do work on things that purely only benefit their own tenants etc etc with no consultation to other leaseholders.


    The advantage will be that you and your joint leaseholders can agree to vary the leases in whatever way you choose. (But all leaseholders would have to agree.)

    e.g. Extend the term to 999 years, reduce the ground rent to zero, allow/ban pets, allow/ban subletting etc.



    That advice is nonsense.

    You would own a leasehold flat plus a share of freehold. Most buyers see that as desirable - and getting a mortgage isn't a problem.

    But don't call it a freehold flat, because it's not, and that will confuse people.



    Edit to add...

    But the really big potential problem is that all the leaseholders (joint freeholders) have to agree on stuff.

    So, for example, if some of your fellow leaseholders are 'fools' - you might find it very frustrating.
    Originally posted by eddddy

    I'm really confused which way is best for me to go. If they were more professional to deal with I probably wouldn't be stalling.

    I'm worried that as they could make things more difficult if I don't go ahead. They can't alter the terms of the lease I have could they??

    I'm not sure I will get much benefit out of parting with a lot of money.
    • eddddy
    • By eddddy 3rd Sep 17, 10:58 AM
    • 5,122 Posts
    • 4,775 Thanks
    eddddy
    They can't alter the terms of the lease I have could they??
    Originally posted by Kirri
    No - they cannot alter any terms in your lease without your agreement.

    ...don't deal with issues that are day to day problems and have awarded themselves the contracts to manage things like gardening and cleaning too. So from the service charge we pay them for the contract to do the work, they contract the work out (have admitted paying cash in hand) and so they take a cut of the work and we get sub standard work done paying far more than we need to...
    Originally posted by Kirri
    There are laws to prevent this kind of stuff - but it will involve you taking them to a tribunal.

    By law, service charges must be 'reasonable'.
    e.g. If you can get show that other gardeners would charge much less than the freeholder's gardeners, the gardening fee you're paying is not 'reasonable'.
    (If you dispute a service charge, you must make that clear when you pay it, in order to challenge it at a tribunal).

    See: http://www.lease-advice.org/fact-sheet/service-charges/

    Also... take a look at: http://www.lease-advice.org/advice-guide/service-charges-other-issues/

    It says:

    Where the service charge is payable by the leaseholders of more than four dwellings, the summary must be certified by a qualified accountant as a fair summary and sufficiently supported by accounts, receipts and other documents produced to the accountant.
    As well as receiving the summary, the leaseholder has the right to inspect documents relating to his service charge as a follow-up to provide more detail on the summary. Within a period of six months from receipt of the summary, the service charge payer (or the secretary of a recognised tenants’ association) may write to the landlord requiring him to allow access to and inspection of the accounts, receipts and any other documents relevant to the service charge information in the summary and to provide facilities for them to be copied.
    Where a landlord fails without reasonable excuse to comply with either a request for a summary or to inspect supporting documents they commit a summary offence on conviction and are liable for a fine of up to £2,500
    • Kirri
    • By Kirri 3rd Sep 17, 11:27 AM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    Brilliant I will look into this further then

    The service charges have doubled since I've been here and they are using some of that to fund the freehold now. I'd challenged the rises in the past on multiple occasions.
    • eddddy
    • By eddddy 3rd Sep 17, 4:50 PM
    • 5,122 Posts
    • 4,775 Thanks
    eddddy
    The service charges have doubled since I've been here and they are using some of that to fund the freehold now.
    Originally posted by Kirri
    They can't do that (unless you agree).

    Your service charge is very specifically for the freeholder to do whatever the lease says they must do - typically maintain the building and pay for buildings insurance.

    They cannot use it for any other purposes which aren't mentioned in the lease like:

    - Buying the freehold
    - Buying lock-ups to put in the garden
    - Installing a water feature in the garden
    - Going on a cruise

    ... unless you agree.
    • Kirri
    • By Kirri 3rd Sep 17, 10:40 PM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    They can't do that (unless you agree).

    Your service charge is very specifically for the freeholder to do whatever the lease says they must do - typically maintain the building and pay for buildings insurance.

    They cannot use it for any other purposes which aren't mentioned in the lease like:

    - Buying the freehold
    - Buying lock-ups to put in the garden
    - Installing a water feature in the garden
    - Going on a cruise

    ... unless you agree.
    Originally posted by eddddy
    They've paid 11k of legal survey fees for buying the freehold out of reserves taken from the increased service charge we've had to pay...
    • eddddy
    • By eddddy 3rd Sep 17, 10:56 PM
    • 5,122 Posts
    • 4,775 Thanks
    eddddy
    They've paid 11k of legal survey fees for buying the freehold out of reserves taken from the increased service charge we've had to pay...
    Originally posted by Kirri
    So, like I say, they have no right to spend your money in that way.

    (But if they claim you agreed to them spending money on that, it might get messy.)

    Maybe get some free advice from LEASE, they're a government funded organisation:
    https://clients.lease-advice.org/appointments.aspx
    https://clients.lease-advice.org/
    • Kirri
    • By Kirri 10th Sep 17, 10:47 AM
    • 6,104 Posts
    • 20,526 Thanks
    Kirri
    So, like I say, they have no right to spend your money in that way.

    (But if they claim you agreed to them spending money on that, it might get messy.)

    Maybe get some free advice from LEASE, they're a government funded organisation:
    https://clients.lease-advice.org/appointments.aspx
    https://clients.lease-advice.org/
    Originally posted by eddddy
    Brilliant, thanks, have submitted an enquiry.

    Looks more like near to 20k of reserves they are using for initial fees on freehold purchase.
    They are still increasing our service charge for next 2 years specifically to pay for work needed on communal areas.
    Seems so unfair.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

109Posts Today

1,138Users online

Martin's Twitter
  • Shana tova umetuka - a sweet Jewish New Year to all celebrating. I won't be online the rest of t'week, as I take the time to be with family

  • Dear Steve. Please note doing a poll to ask people's opinion does not in itself imply an opinion! https://t.co/UGvWlMURxy

  • Luciana is on the advisory board of @mmhpi (we have MPs from most parties) https://t.co/n99NAxGAAQ

  • Follow Martin