Buildings insurance for Leasehold flat?

prudryden

Ed - Good post! One thing though, the lease-advice link does say the freeholder will NORMALLY take care of the building insurance. EDIT: meaning he doesn't have to, but what freeholder would take that risk - sounds like the OP is dealing with a clever boy or, at the least, one trying to put one over on the buyer.

prudryden

Sorry Ch - I meant the freehold for the whole building and land with the current freeholder keeping the leasehold on the 1st floor flat to sell or not. That way, you have some control over noise levels etc. on the flat above yours. Very important. Speaking from experience.

prudryden

Freehold flat: I think the freeholder means freehold of the building/land. You're flat would still be leasehold.
p.s hit the thanks button, we need them, especially me.:)

chicarg

Sorry, maybe I didn't explain myself properly.

The vendor has offered us to buy a 50% share of the freehold after completion. Meaning our flat will be share-of-freehold flat. As I understand it, there is still a lease but you also are joint freeholders.

I am assuming he will offer the other 50% share to whoever buys the flat above, so he doesn't have anything to do with the lease any more.

Our broker advised us not to buy our share of the freehold because it can be difficult to re-sale afterwards as lenders are not too happy with this arrangement.

He has not offered us the full lease although it can be an interesting option. Again, I don't know how can this affect mortgaging.

prudryden

Is he wanting to turn this two flat victorian house into a Commonhold? If that is the case, hopefully, someone with knowledge in this area, will pick up on the thread. Seems a bit of an overkill for a two flat building, however.

prudryden

Right....! The freeholder is basically getting rid of the property including the freehold. He is doing this by selling the two flats separately with 50% of the freehold of the building allocated to each flat (as opposed to selling the whole of the building at once). But, because the freehold has some separate value (not much), he gives you the choice of buying it or not. If you don't, then he will probably sell it to the other flat or elsewhere.

Having another flat in the same building owning 100% of the freehold, unless it is you, is not a good option. E.Q. they can change parking spaces around or even eliminate them. Decide who has excess to the garden, refuse to extend the length of your lease etc etc.

olly300

I did a quick internet search to confirm what I know about family members who live in share of freehold properties.

The simplest solution is to buy the freehold jointly with the other lease holders, set up a management company where each of you have a equal share and then lease the flats to each of the people who own flats in the building i.e. you and the other owner(s). On sale of a flat you offer the new flat owner as a condition of purchase the right to be director of the management company and your share of the freehold. By law you would have separated the lease and the freehold, and therefore get around many mortgage lenders that way.

You need to ask a solicitor to confirm this not a mortgage broker.

This is a lot of hassle for a 2 flat property but not if you are in a block. As owing 50% of something when you disagree can cause problems.

This gives details of different mortgage lenders conditions. (section Paragraph 5.5.3 )
http://www.cml.org.uk/handbook/frontpage.aspx

sarah_elton

prudryden wrote:

Ed - Good post! One thing though, the lease-advice link does say the freeholder will NORMALLY take care of the building insurance. EDIT: meaning he doesn't have to, but what freeholder would take that risk - sounds like the OP is dealing with a clever boy or, at the least, one trying to put one over on the buyer.

I agree - if I owned a property I wouldn't trust other people to have buildings insurance. What if they didn't renew then there was a gas explosion? (sorry I've got a thing about things blowing up today lol) He'd be completely screwed....

It's 'normal' for the freeholder to take out insurance - and is by far the simplest solution even if the two leaseholders pay for it (which seems a bit cheeky to me but appears to happen). What if you pay for your buildings insurance, but the roof leaks causing structural damage to your property? Could get complicated if the building is divvied up....

EdInvestor

It's 'normal' for the freeholder to take out insurance

Not only is it normal, it's regarded as quite appropriate for the freeholder to charge a premium to the leaseholders on top of the actual cost of the insurance to reflect the work he does in sorting out the admin.Many freeholders regard this as a "profit centre".

The freeholder on this thread seems to be a bit oif a dimwit.Who need s flake freeholder who can't even sort out the buildings insurance when they haven't even sold off the flats?Is the building insured right now?

Get your solicitor to ask some hard questions and read the lease ASAP.God knows what that's going to be like if he can't even sort the insurance. :rolleyes: