Freeholder sitting on lease extension?

twisty

Hi guys,

I really hope somebody can offer me some advice.

(I will start from the beginning otherwise I will lose my train of thought!)

I am buying a leasehold flat and we are quite close to completion. The flat currently has 80 years left on the lease and is in a block of 18 flats.

As a condition of our offer, which was accepted and we have in writing, the sellers agreed to extend the lease back up to 99 years. The reason we asked for this was because the lease drops to 79 years in September and would be 77 or 78 years by the time we would be eligible to serve notice on the landlord to extend it.

Now we have reached the point where we can exchange but the current freeholder seems to be sitting on the the lease extension form for some reason.

We have now found out that there is a process underway where some of the lessees are getting together to purchase the freehold. The seller's EA suspects that this might be behind the hold-up (i.e. they want a slice of the leasehold extension fee so are stalling until the transfer of freehold has gone through).

One of the flat owners apparently works for the building's management company. We have to wait until Monday to speak to this guy as he is on leave, and we are hoping that this is not the case and that he will help us jump this final hurdle.

But in case they are stalling, the EA said he has discussed with the seller the possibility of them giving us a cheque to extend the lease and assigning the rights to extend over to us on completion. He said it would all be drawn up legally so that they are obliged to do it on same terms, same price etc.

Has anyone had any experience of situations like this? We are keen to move as soon as possible but not at any cost.

What should we do?

Doozergirl

If the other leaseholders are joining together to purchase the freehold then why is your flat not involved in that??? I'd rather have a SOF than the lease extension?!

You need your solicitor to lay out what is happening in plain english so that you can make an educated decision.

twisty

Some of the other leaseholders are joining together, but not all.

The owner of the flat we are buying chose not to buy the share of freehold, informing us that it would not be going through until later in the year and he wanted a quick sale. On this information, we decided that a lease extension would be quicker, and then once we own the flat we can try and get in on the share of freehold process.

We also would have preferred to have come out with the share of freehold but we can't force the current owners to do it, and it did sound at the time like it was going to be a lengthy process.

You're absolutely right about what we need our solicitor to do. Without going into details, I'm afraid that this hasn't happened, which is why I am on here.

I suppose my questions are: a) has anybody else had a situation where a lease extension has been going through alongside an application to buy out the freeholder? and b) what should I be thinking about/asking if we do decide to go down the route of having the right to extend the lease signed over to us on completion, then finalising the extension post-completion (using seller's money)?

Thanks

Doozergirl

To have the lease extension and then purchase SOF would be paying twice. If you plan to buy the SOF then you may as well take a reduction in the purchase price to reflect the shortening lease.

You can extend a lease within two years of ownership. It's just that you can legally serve notice on your freeholder after two years if they don't play ball within that time. Most freeholders will negotiate with you before two years.

I would serioiusly be looking into getting involved in that SOF purchase. The associated fees of extending the lease now alone will negate any saving made by extending before the lease drops below 80 years. Personally I think you're panic buying the lease extension if you actually want SOF. If you have the SOF then you can extend the lease at the same time. I'd rather do the right, considered thing and pay a bit more for a lease extension in a year or so than make the wrong decision and effectively pay twice.

Make an appointment to see your solicitor and go and speak about it properly. This is very important and I would make more enquiries of the freeholder.

I can't see how it's better for the existing freeholder to wait to sell the freehold befire they extend? They won't be the freeholder anymore! If anything, your lease extension will affect the value of the freehold purchase and make it more complicated when they are trying to split the price between several people.

twisty

But how can I muscle in on buying the freehold of a flat that I do not own yet? Surely this decision can only be taken by the current owners and they have already flatly refused to get involved.

It may seem like panic buying but we are working with what we have. A lease extension now is the only concrete thing on the table. Talks of buying freeholds and hopes of being able to piggy-back on such a process after we complete requires us to take people's word on these matters.

We wouldn't be paying twice as the seller is paying for the lease extension.

Anyway, I don't mean to seem argumentative, I just wanted to try and explain why this doesn't seem quite so clear cut to us. Your ideas are really helpful - I am going to try and speak to the senior partner at our solicitors on Monday as the numerous conversations with the firm I have had so far have not helped.

DVardysShadow

twisty wrote: »

... We wouldn't be paying twice as the seller is paying for the lease extension.

I think you are missing something. It is worth a whole lot less without the extension. The seller is not paying out of his pocket - you are paying him for it.

Doozergirl

You are close to completion. 80 years is not the end of the world and you can extend a lease within two years. Admittedly yes you have to take someone's word but you are most definitely going to be paying twice, especially as the vendor is now offering you cash to pay for the lease extension.

You need to know where the process invloving enfranchisement is as I am sure that the people buying it will be relieved that they don't have to pay your share as well if there is time for you. It prevents any more delay on buying the property. If anything, ask the vendor for the full price of the lease extension plus say £1000 in case you can't extend it or buy your SOF immediately. That covers you entirely.

Proper appointment with a solicitor who will explain to you why it is pointless buying a lease extension and then SOF, please!

twisty

Hi thanks for the advice above. I have spoken to everybody involved continuously over the past couple of days and I am pleased to say that an agreement has been reached.

They are going to give us the money that they were going to spend on the lease extension and we are going to join in on buying the freehold after we complete.

I have spoken to the guy who is driving the process and he is happy for us to be on board (turns out 'ours' is the only flat to have turned down the opportunity). We know the approx. cost and it is about the same as the lease extension (just slightly more).

What's more, our solicitor thinks that, due to the relatively small amount involved, we won't have to readjust the purchase price etc, saving time.

I'm really happy with this outcome so thanks to the posters above, particularly Doozergirl

Doozergirl

Brilliant. That sounds like the perfect outcome! Thanks for coming back and telling us.
Good luck with your move!

Richard_Webster

In this case you seem to have arrived at the right solution.

Please remember though that whilst it normally follows almost automatically that once the freehold has been bought the leases get extended for no more costs than for the legal work invovled this is not a legal entitlement - so make sure the people buying the freehold will do "free" lease extenions afterwards.

I have occasionally come across people who think that because they have bought the freehold they don't need to extend the leases. For instance, whilst those driving it now may understand the whole business, later on down the track, when new people are involved, they may just be plain difficult or stupid - so get your extension as soon as you can to avoid problems later.

twisty

Richard, thanks for the word of warning. I have spoken on the phone with one of the other flat owners and he expressed the intention to extend the leases of all the flats after the freehold has been bought, and for this to be done with no fee (except legals).

Obviously, this is not binding in anyway, but I am as confident as I think I can be that we will be able to sort it out fairly quickly.