Why be a freeholder?

EdInvestor

See https://www.lease-advice.org.uk for info on freehold values and regulations.

CB1979_2

pigeonpie wrote:

Depends what you paid for the freehold. ie 15k getting you 10k a year is not half a bad return on your investment!

Buying leasehold without a long lease and a huge mortgage is pretty much the same as renting. But if you haven't got a huge mortgage, you'll at least get something back when you sell.
My grouse about freeholders is they often (not nice ones like doozergirl!) take the money and 'disappear', then reappear with huge maintenance bills for which you've got to cough up 9% with no vote on whether the work should be done or by whom.
I've heard it takes a few years from every flat being owner occupied to apply for the freehold - is that right? (most here still tenanted) I wonder if he paid 15, what 'reasonable' amount he'd want, given his current nice-little-earner return. Hope what he can ask for is not linked to price rises in the area :eek:

yeah i see all that too, just our flats are maintained by the residents association, all the freeholder does is literally make us pay once a year for the insurance (he gts £4k in total), then nothing again, so i just don't see the reasoning behind it, unless it's to purely "cash in" when anyone wants to extend the lease.

Doozergirl

pigeonpie wrote:

I've heard it takes a few years from every flat being owner occupied to apply for the freehold - is that right? (most here still tenanted) I wonder if he paid 15, what 'reasonable' amount he'd want, given his current nice-little-earner return. Hope what he can ask for is not linked to price rises in the area :eek:

Incorrect. There's much more information on EdInvestor's link, but 75% of the flats need to have been owned for two years, reagardless of who lives in them and 50% of the 'tenants' (that what you are effectively) must be willing to buy. You have to buy 100% of the freehold. Whether people are up for buying will depend on the length of their leases, probably.

The alternative is taking the Right To Manage, which is the cheaper option. It lets you collectively control the management of the building, either yourselves or by appointing a less expensive managing agent. Have you read my thread? http://forums.moneysavingexpert.com/showthread.html?t=271485

There's a great one by Tom Stickland which also outlines the freeholders legal responsibilities with reagrd to work, the selection of contractors and the subsequent billing. http://forums.moneysavingexpert.com/showthread.html?t=273810

CB1979_2

yep yep yep, but why be a freeolder?

it's a business, so where does the profit making come into it?

filigree_2

I live in a leasehold flat which is one of three converted from a Victorian house. We are nearing the end of a bitter six month battle with the scumbag freeholder who has fought tooth and nail to oppose the sale. Why? All he gets is a lousy £40 a year from each flat. He never ever has to exert himself to manage the property because we do absolutely everything, adding to the value of the property at no cost to him. With current laws he is obliged to sell us the freehold but he has put in ludicrous counter claims, intrusive repeated inspections, grossly inflated claims to costs. He took us right up to the brink of a tribunal before caving in and accepting our offer - £50K instead of the £130K he originally demanded.

He made a fat profit on the original conversion by buying up a slum and cobbling together a shoddy conversion with cowboy builders. I have no idea what benefit he derived from remaining as the freeholder and no idea what motivates him now. The man is a raving psycho.

EdInvestor

Freeholders get the ground rent.They are allowed to charge a fee for organising the insurance IIRC and they can charge a fee for managing the building if they choose to do so. You quite often find that the freeholder is also a builder/decorator and ends up getting paid for doing all the regular internal and external decoration work on the property, which can amount to quite a big fee every 5 or 6 years.

In some builidngs freeholders can charge leaseholders for permission to sublet to tenants (always check for this as it can be quite expensive if you need to turn the flat into a BTL later on) or to make structural alterations.

When the leases start falling below 80 years the freeholder can charge a premium for extending the leases back up to a reasonable length, and this amount will tend to rise (or fall) along with property prices.

It's a fairly specialised area, but a clutch of freeholds can produce a decent amount of dividend type annual income, along with capital growth over time, and extra money for those in the building trade.

EdInvestor

filigree wrote:

The man is a raving psycho.

The sector does seem to attract some people whose behaviour is err, less than optimal, shall we say. Not sure why - hopefully since it's become somewhat better regulated of late and leaseholders' powers have been improved, some of the more thuggish landlords will move on.