Should I purchase the freehold?

chelseablue

In August 2010 I purchased a flat in a block of 36. The block was built in the 1970's

A lot of the flats have shortish leases left (60 years)

Mine has 122 years remaining (the guy I purchased from paid to extend his lease)

Now the idea has been put forward to purchase the freehold of the block.

As I already have a long lease would this be something I should look into? And if I decide not to go ahead with the others, can I join the others and purchase the freehold in a few years? (when I have more money )

chelseablue

Anyone? I have a residents meeting about it tonight

cheatedresident

It all depends on the cost of the freehold and how much you pay ground rent.

There are a number of elements you need to consider:

Does the current landlord manage the development?
Are the costs they incur reasonable?

Without further ifnromation I would suggest with a 125 year lease, depending on cost of course, it wouldnt be worth it to you.

You do not need all residents to buy the freehold, 18 of them could get together and purchase the freehold and then they would become the landlord and collect ground rents etc.

chelseablue

cheatedresident wrote: »

It all depends on the cost of the freehold and how much you pay ground rent. Ground rent is £200 per year

There are a number of elements you need to consider:

Does the current landlord manage the development? No, the residents manage the block
Are the costs they incur reasonable? If you mean service charge, that is £800 per year

Without further ifnromation I would suggest with a 125 year lease, depending on cost of course, it wouldnt be worth it to you.

You do not need all residents to buy the freehold, 18 of them could get together and purchase the freehold and then they would become the landlord and collect ground rents etc.

Thank you

propertyman

Only the freeholder can grant the lease extensions so enfranchisement is attractive. Many do not understand that the leases must remain in place, they are not buying a "share freehold". They will individually own a flat under a lease, and either jointly with 35 others or, most often, be a shareholder in a company that, owns the freehold.

However the value is based on

-A rate of return of the total rent receivable often 15/20 times
-the cost of the lease extension simply the difference in value of the flat with 60 years left and the flat with a longer lease
- any development or hope value for the site and any other income eg garage rents

If only 20 of you can afford to buy the freehold then you share the total cost between you, and have to negotiate with each flat that wants to buy in or get an extended lease in the future.


On the other hand each owner has a statutory right to get a lease extension of 90 years plus whatever they currently have, and in future to pay a peppercorn rent. That price is agreed or independently determined by the LVT.


If one benefit of acquiring the freehold is control, then the block can exercise right to manage, which takes all responsibility away from the freeholder and their agents, and the block manages itself. I see you manage yourselves so this is for readers whose situation may be different. RTM leaves individual owners able to negotiate lease extensions as they need to with the existing freeholder, and overall saves considerable amounts of money that lines the freeholders pockets, not yours.

It is especially important when more than a few could not afford to join in with freehold purchase, as it means that those that do have to pay more, in effect making up the share of the cost of those that do not participate.

In the future face that means making some very large demands for a lease extension from your lovely next door neighbour, to repay the investment you have made in buying the freehold. That is not always a pleasant process, and your cat or plants might not be looked after while you are holiday...


There is no bulk discount for negotiating 20 or 36 lease extensions in one, except a saving in legal and valuation fees, which might be a few % of the overall sum that you will each pay.

http://www.lease-advice.org/publications/

chelseablue

Its all very confusing

Jeffrey_Shaw

chelseablue wrote: »

In August 2010 I purchased a flat in a block of 36. The block was built in the 1970's

A lot of the flats have shortish leases left (60 years)

Mine has 122 years remaining (the guy I purchased from paid to extend his lease)

Now the idea has been put forward to purchase the freehold of the block.

As I already have a long lease would this be something I should look into? And if I decide not to go ahead with the others, can I join the others and purchase the freehold in a few years? (when I have more money )

You as one flat's leaseholder have no right to buy the block's freehold reversion, of course, and no leaseholder should ever buy just one flat's f/r. But a collective purchase ('enfranchisement') is usually a good idea, if the price is right or at least affordable.

propertyman

chelseablue wrote: »

Its all very confusing

Its complicated, and your group ought to get advice

If you follow the link to lease- advice it has a section on buying the freehold of a block of flats.

If you as a group control your homes, and the landlord only collects ground rents and has no development rights such as building a new block over the garages at the back, then there is little value to the community in buying the freehold.

Bear in mind that with only 60 years left on your lease , it is going to be very expensive.

:money:A viable alternative is that those of you want a lease extension can as a group instruct a solicitor and surveyor to deal with all your lease extensions at once, which will save you all money on the legal and valuation fees.

Richard_Webster

Bear in mind that with only 60 years left on your lease , it is going to be very expensive.

I don't think that's right - OP's lease is 122 years. However, of course the overall price will have regard to the number of shortish leases, and although OP ought to pay a smaller share because his lease has already been extended, it is often difficult to get others participating in a collective freehold purchase to understand that.

propertyman

Richard_Webster wrote: »

I don't think that's right - OP's lease is 122 years. However, of course the overall price will have regard to the number of shortish leases, and although OP ought to pay a smaller share because his lease has already been extended, it is often difficult to get others participating in a collective freehold purchase to understand that.

Sadly Richard that is not entirely correct.

Each individual will make a contribution to the companies purchase which will be adjusted to reflect the length of their lease, and the length of their extension ( amongst other factors).

If as posted a substantial number do not participate (often due to the high premium on a 60 year lease) the shortfall is made up equally in most cases. That is therefore very expensive.

As posted on the benefits to the community, if the freehold purchase presents as it does in this case an opportunity for the new freeholders to benefit from the premium from future lease extensions, a separate class of shares can be created so that some of the participants might take on that investment and spare the others that additional expense.

In some cases we have negotiated a grant of a lease of the unit for 999 years s that the freeholder retains the lease extension rights and the leaseholder retains all their normal rights and obligation under their existing if slightly varied lease.

Richard_Webster

Each individual will make a contribution to the companies purchase which will be adjusted to reflect the length of their lease, and the length of their extension ( amongst other factors).

That should be the case, but I wonder whether in practice this actually happens.

If as posted a substantial number do not participate (often due to the high premium on a 60 year lease) the shortfall is made up equally in most cases. That is therefore very expensive.

I agree, this is the problem.