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Is it worth buying the freehold when you have a 999 year lease?
Chris_0
Posts: 1 Newbie
Just wondering if anyone can offer me any advice on the following.
I own a flat, and as is the usual practice that means I'm a leaseholder. The freeholder has just offered to sell the freehold to all the leaseholders in our building. I have very mixed feelings about this. Here are just a few reasons why:
1) The building is well-managed and maintained. Some leaseholders think the service charge is too high, and they want to buy the freehold so that they can either negotiate a lower service charge from the managing agent or change the agent for another company completely. I'm quite happy with the status quo, however. I'd rather pay to have the building well-maintained, than skimp on the service charge and then find that communal areas start to fall apart.
2) The ground rent is only £450 per year. A share of the freehold is going to cost the best part of £10,000. It's unlikely I'm going to stay in this flat long enough to make back the cost of the freehold in waived ground rent. I will have to borrow the £10,000 by adding it on to our mortgage, so what we save on ground rent will instead be spent on interest on this loan. Owning a share of the freehold won't save us any money.
3) I owned a share of the freehold in my previous building, and it was a nightmare. I was the only person who organised anything, and extracting the service charge from leaseholders was always a battle. Getting other leaseholders to stump up the cash for essential maintenance and increase the service charge so that we had a sensible provision for future major expenditure was like pulling teeth. I could do without that kind of hassle, and I was relieved when I moved and was no longer a Director. I like not having to worry about building maintenance, buildings insurance, roof repairs etc. etc.
4) Other leaseholders have already volunteered that they see getting the freehold as an opportunity to grant themselves permission to modify/extend their properties. This fills me with dread. The idea of odd flats sprouting balconies, each one done differently, for example, sounds like a recipe to wipe out a good portion of the value of neighbouring flats that have to put up with a neighbour with a balcony (think obscured views, less light, more noise...) without having one themselves. We live in a really attractive, quiet building. It could easily be ruined by ill-considered modifications.
5) Having a share of the freehold, at a cost of £10k, will not translate into a £10k increase in the market value of our flat when we come to sell. It feels like money down the drain.
6) We have a 999 year lease. What is the point in buying the freehold? The building will fall down long before the lease has to be extended.
Anyone got any advice, thoughts or views on whether we should take part in buying the freehold? We've already had an email through from one of the other flats who is leading the charge to purchase saying that if we don't take part and change our minds later, the cost of purchasing a share off the new freehold company will be "considerably higher". This makes me feel rather bullied and blackmailed. I don't want to buy a share of the freehold, but if these people go ahead and we don't take part, I feel like they could go ahead and do all kinds of crazy stuff and we'll have no way of influencing or stopping them. £10k is a lot of money to have to find just to retain influence in the way our building is run, but I sort of feel like we don't have much choice.
Help!
Chris
I own a flat, and as is the usual practice that means I'm a leaseholder. The freeholder has just offered to sell the freehold to all the leaseholders in our building. I have very mixed feelings about this. Here are just a few reasons why:
1) The building is well-managed and maintained. Some leaseholders think the service charge is too high, and they want to buy the freehold so that they can either negotiate a lower service charge from the managing agent or change the agent for another company completely. I'm quite happy with the status quo, however. I'd rather pay to have the building well-maintained, than skimp on the service charge and then find that communal areas start to fall apart.
2) The ground rent is only £450 per year. A share of the freehold is going to cost the best part of £10,000. It's unlikely I'm going to stay in this flat long enough to make back the cost of the freehold in waived ground rent. I will have to borrow the £10,000 by adding it on to our mortgage, so what we save on ground rent will instead be spent on interest on this loan. Owning a share of the freehold won't save us any money.
3) I owned a share of the freehold in my previous building, and it was a nightmare. I was the only person who organised anything, and extracting the service charge from leaseholders was always a battle. Getting other leaseholders to stump up the cash for essential maintenance and increase the service charge so that we had a sensible provision for future major expenditure was like pulling teeth. I could do without that kind of hassle, and I was relieved when I moved and was no longer a Director. I like not having to worry about building maintenance, buildings insurance, roof repairs etc. etc.
4) Other leaseholders have already volunteered that they see getting the freehold as an opportunity to grant themselves permission to modify/extend their properties. This fills me with dread. The idea of odd flats sprouting balconies, each one done differently, for example, sounds like a recipe to wipe out a good portion of the value of neighbouring flats that have to put up with a neighbour with a balcony (think obscured views, less light, more noise...) without having one themselves. We live in a really attractive, quiet building. It could easily be ruined by ill-considered modifications.
5) Having a share of the freehold, at a cost of £10k, will not translate into a £10k increase in the market value of our flat when we come to sell. It feels like money down the drain.
6) We have a 999 year lease. What is the point in buying the freehold? The building will fall down long before the lease has to be extended.
Anyone got any advice, thoughts or views on whether we should take part in buying the freehold? We've already had an email through from one of the other flats who is leading the charge to purchase saying that if we don't take part and change our minds later, the cost of purchasing a share off the new freehold company will be "considerably higher". This makes me feel rather bullied and blackmailed. I don't want to buy a share of the freehold, but if these people go ahead and we don't take part, I feel like they could go ahead and do all kinds of crazy stuff and we'll have no way of influencing or stopping them. £10k is a lot of money to have to find just to retain influence in the way our building is run, but I sort of feel like we don't have much choice.
Help!
Chris
0
Comments
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You have answered your own question really. The issue is service charge levels and the relationship with the agent.
1;form a residents association and work with the agent, most good agents will do so as long as you are sensible in your expectations and requests.
http://www.fpra.org.uk/
2: exercise the no fault and no cost right to manage, you can keep the agent find a new one or self manage.
http://www.lease-advice.org/publications/documents/document.asp?item=21
Don't give the freeholder 10k when you can spend it on yourselves or on the building.Stop! Think. Read the small print. Trust nothing and assume that it is your responsibility. That way it rarely goes wrong.
Actively hunting down the person who invented the imaginary tenure, "share freehold"; if you can show me one I will produce my daughter's unicorn0 -
Freeholds always fetch more though.....and people prefer feeholds to leaseholds....0
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