buying the freehold of my flat

stu17

Hi

I have been given the opportunity to buy a share in the freehold in the 17 apartment block where I live.

Is this a good investment of should I stay as a leaseholder.

If the majority of owners buy, am I forced to buy. or can I stay as a leaseholder.

Basically I would like to know of advantages and disadvantages.

Thanks

Hartley10

I too have the opportunity to buy the freehold as part of 10 apartment block, the developer who is the current freeholder is looking to sell and I have received notice of this from their solicitors.

My understanding is that at least 50% of the leaseholders have to participate in order to purchase. If i'm not one of the 50% then my leaseholder entitlement does not change.

If less than 50% of the leaseholders want to buy...can the developer then sell to anyone it wants too ?

Like Stu17, would like to know the advantages & disadvantages of buying into the shared freehold.

Thanks
Steve

daveb975

Buying the freehold actually means that the participating leaseholders will own a share in the company that owns the freehold of the building.

The advantages of this are:

1. You will have control over repairs/maintenance and associated funding - there will no longer be a freeholder taking a cut.

2. The company can grant lease extensions or new leases whenever it likes, so there will be no costly lease extension process when that time comes.

3. It should add some value to the flat itself.

Disadvantages:

1. The company will have to buy the freehold to the whole development. If 6 out of 10 leaseholders participate, they will have to find the cash to buy the freehold for all 10 flats. When/if the remaining leaseholders choose to 'buy in', the money can be recouped.

2. There could be infighting between the owners of the new freehold company - e.g. several want to replace the roof, but the others feel it is unnecessary.

3. The cost is the main one! If the current freeholder does not want to sell, you can often force it upon them at a value set by the Leasehold Valuation Tribunal. The price is influenced by a number of things including capital value and remaining lease length. If you have a flat that is worth £250k and has around 80 years left on the lease, I would budget for around £15k.

Richard_Webster

Buying the freehold actually means that the participating leaseholders will own a share in the company that owns the freehold of the building.

The advantages of this are:

1. You will have control over repairs/maintenance and associated funding - there will no longer be a freeholder taking a cut.

2. The company can grant lease extensions or new leases whenever it likes, so there will be no costly lease extension process when that time comes.

3. It should add some value to the flat itself.

Disadvantages:

1. The company will have to buy the freehold to the whole development. If 6 out of 10 leaseholders participate, they will have to find the cash to buy the freehold for all 10 flats. When/if the remaining leaseholders choose to 'buy in', the money can be recouped.

2. There could be infighting between the owners of the new freehold company - e.g. several want to replace the roof, but the others feel it is unnecessary.

3. The cost is the main one! If the current freeholder does not want to sell, you can often force it upon them at a value set by the Leasehold Valuation Tribunal. The price is influenced by a number of things including capital value and remaining lease length. If you have a flat that is worth £250k and has around 80 years left on the lease, I would budget for around £15k.

I broadly agree with this. The cost to you will vary depending on how many participate. If you don't participate then you may get charged a large sum for a lease extension in the future. If you do then you normally won't.

If you are looking to sell quite soon and the leases are still well over 80 years then the buyer might not spot the fact that your flat doesn't have a share in the freehold. It would only be an issue in terms of saleability if was one that did have a share and one that didn't on the market at the same time. Otherwise the average estate agent and the average buyer wouldn't spot the point.

If you are looking to stay for some time or the leases are 82 years or less then it si better to join in buying the freehold.

Robert_Sterling_3

MSE is very fortunate to have Richard Webster on board giving clear accurate answers to many questions. :T :T :T :T :T

GDB2222

daveb975 wrote: »

Disadvantages:

2. There could be infighting between the owners of the new freehold company - e.g. several want to replace the roof, but the others feel it is unnecessary.

I just wanted to add my own experiences of this. I own a flat in a block where my son lives. Originally, the freeholder was what I can only describe as a complete shyster. Eventually, after a long battle, The leaseholders bought the freehold.the management of the block is much improved. The place is noticeably cleaner and better maintained on a day-to-day basis. However, the really big work that is outstanding from the previous management has not been completed. the reason is simply money. Nobody wants to dig into their pockets at the moment. I find that very frustrating.

Incidentally, there is a halfway house between buying the freehold and taking over the management of the block. There is nothing to stop the leaseholders putting in an application (to the courts) to take over the management of the block, and that is vastly cheaper than buying the freehold.

gfplux

Just a point GB2222.
Why not create a "sinking fund" This is a fund created by adding a small sum to everyone's monthly maintenance payment to build up a fund to repair the roof, re carpet and paint the common area's, re tarmac the parking area or any other of the many jobs needed on a block of flats.

EdInvestor

Lots of useful info and a free advice service on freehold/leasehold issues here:

https://www.lease-advice.org.uk