Difference between share of freehold value in flats

SGreenway

Hi there,

We are purchasing a flat that was advertised as share of freehold. It turns out that it is not fully share of freehold, but has a share in the management company that is owned by the freeholder. We have also discovered it only has 77 years left on the lease, which we weren't informed about.

If the seller agrees to extend the lease before we complete the purchase, will the property be worth less than we offered when we thought it was fully share of freehold? And how many years is an acceptable lease, given we thought it was share of freehold?

Many thanks for your advice,

S

DVardysShadow

I know nothing about leasehold. But it seems to me that share of freehold and self management, although they have some advantages, are not entirely unmitigated benefits to leaseholders. There are some big down sides, which I suggest you research and understand.

My gut feel is that the arrangement you are contemplating buying into will be the worst of both worlds - and my antennae would be twitching at the misdescription of the arrangement.

hazyjo

If it was 'share of freehold' (that term will be berated soon enough lol - but I/we know what you mean), you would still have a lease.

You should have made your initial offer based on the length of lease. Did you think that SoF meant it wouldn't have a lease at all?

As above, SoF isn't always beneficial. Has worked well for me in the past, and does for many, but if nobody's motivated, clued up, or has the time to deal with any issues, it can be a nightmare.

I would want the lease extended too. Good luck with that...

Jx

G_M

SGreenway wrote: »

Hi there,

, but has a share in the management company that is owned by the freeholder.
S

If the management company is 'owned by the freeholder' how can you have a share in it unless.... you are the freeholder! (or at least ONE of the joint freeholders)

That is what SoF means. A Mgmt Co is created, which is jointly owned by each of the flat -owners in the block, thus they all have a SoF.

But they also still each have a lease. The fact that the freehold is jointly owned by the flat owners does not remove their lease.

As for the 77 years, yes, if it is extended then the flat will be worth more. 99 years is a common time-period for extension. 125 also (and better). 999 is also possible.

Since the flat owners (leaseholders) also share the freehold, it for them to decide whether to extend, by how much, and at what costs - but since they are effectively paying themselves to extend, it tends to be cheaper and easier than where the freehold is owned by a commercial person/organisatin.

propertyman

hazyjo wrote: »

If it was 'share of freehold' (that term will be berated soon enough lol - but I/we know what you mean), you would still have a lease.

"Hello Mr Burger King person. I'd like a burger"
"Which one Madam? Quarter or Half pounder, Cheese, Vegetarian.."

" A burger ! You know what I mean"

The confusion is because the OP didn't know what they meant as it is made up term.

The OP should ask the Vendor to talk to the Directors of their ( resident owned) Freehold Company to confirm that they will extend the lease. It is normal that you pay the Freehold Companies costs.

The bad news is that this is common failing where residents purchase the freehold, they forget to extend their leases. While the purchase price takes into account the value of lease extensions, subsequent owners might find the FH asking for a market premium to extend.

that's why you need the agreement prior to exchange so that the vendor can assert their position that they joined in that purchase of the FH so as to get a free lease extension

hazyjo

Plenty of people call it 'share of freehold' (including EAs, solicitors, leaseholders, etc) and plenty of people know what they mean. All I was establishing was whether or not the OP knew it would still come with a lease. Not my place to explain the terminology, we all help with what we can, to the extent we can. Left the explaining to someone more knowledgeable than me... Did imply it was the incorrect term, that's as far as I choose to go with it.

Jx

propertyman

hazyjo wrote: »

Plenty of people call it 'share of freehold' (including EAs, solicitors, leaseholders, etc) and plenty of people know what they mean.

But that's the point HJ, they don't know what they mean, they think they do, and it does not mean the same thing to others.

What started as a shorthand term to describe a multitude of possible situations has morphed into a 4th form of property ownership.

That contributes to these sort of problems where leases don't get extended, they get very short resulting in neighbour exploiting neighbour, purchases failing as the lease is lower than understood, flats being bought but the former owner still owns the freehold and cannot be found to transfer their interest or sign paperwork etc.

I don't expect, anymore, EA's to understand ( my firms sales staff do however understand and a permanent 90% + sales conversion record).

But solicitors should, but as they have overseen the transactions that lead to these problems, many do not and also believe in the housing equivalent of Unicorns.

It is the equivalent of saying " how are we getting there? "
"We are taking transport" You make assumptions leading to confusion and mistake.

I conclude with " thanks for all the fees putting them right" :beer:

Ionkontrol

My SoF has a 999 year lease.

propertyman

If your SoF had a 999 year lease, they would then not be a freeholder, but a leaseholder for 999 years...

A freehold property is subject to the leases for individual properties, a flat, a house and otehr units sheds garages storage units etc.

The freehold is owned by
- by group of people jointly who *
- a company with members or shareholders who *
* also own a lease to a lease(s) to the individual; properties.

There a few minor exceptions such as trusts and tweaks in company membership.