Freehold ransom being demanded by 'absentee landlord'

BobProperty

Probably depends on the terms of the leasehold but in some cases I think yes you get the £3 pa until the end of the term and that's it. If they are asking £2000 per property then there has to be something more in it for the freeholder than £3 pa for x years.

CVID

BobProperty wrote: »

Probably depends on the terms of the leasehold but in some cases I think yes you get the £3 pa until the end of the term and that's it. If they are asking £2000 per property then there has to be something more in it for the freeholder than £3 pa for x years.

Like what, assuming the lease still has 900-odd years still to go?

Sounds to me more like the existing landlord is just trying it on.

bionic_banjo

I'll try to explain..The queen owns everything in the UK and the Government in 1925 made it so that you could have two main interests in land from the Queen. The biggest interest in land is a freehold 'fee simple' interest and the more minor is a leasehold 'a term of years absolute'. When you have a lease of something you hold it for a term of years absolute from the person who holds the freehold in return for 'consideration' - this can be money or even something as small as a peppercorn.

In this case the freeholder is offering you, the leaseholder, the opportunity of buying out their freehold interest and stepping into their shoes. If you do this you will become the new freeholder and you will no longer hold the lease - it will be annulled.

At the present time the freeholder has the right to £3 per annum for every property lease plus any rent arrears. So if your lease has say 99 years to run, then the value to the landlord is the right to receive 99 x £3 - which is £297. That makes the £2k asking price look rather expensive. However, the Landlord will also realise that there is a 'marriage value' in uniting the leaseholder(you) with the freeholder interest. This is because he knows that it is far more preferable to hold the 'better' freeholder interest than the 'leasehold' interest and as you are the leaseholder you have a 'special interest' in buying him out - hence the 'special price' of £2000.

These long groundleases have been selling at auction recently and some have gone for quite alot of money - maybe for special purchasers like you or maybe just mad investors. If you can ask for 'trial access' to the Essential Information Group (eigroup) web site you can analyse the market.(Just pretend to be an auction punter trialling the site! You get 3 days!!).

Hope this helps explain.....

TJ27

Why not write back saying, "Thank you for your kind offer, which on this occasion I shall be declining. However, I reserve the right to bid at your auction."

Richard_Webster

Not completely clear whether this is about a long leasehold house or a flat?

Also how long is the lease? If it is a flat is it £2,000 per flat or £2,000 for all the flats in the development?

Once we know these details we can begin to see whether or not there is a problem.

If it is a 999 year lease on a house then the freehold will only be worth about 20-30 x ground rent. Some freeholders make life difficult for lessees by sending questionnaires round in the hope that someone will be daft enough to admit they have built an extension contrary to the lease terms, for which a retrospective consent will then be provided if a payment of £500-£1,000 is made! In my area we have quite a lot of these long leasehold properties with missing landlords etc etc and the local EAs value them at the same price as freeholds.

Freeholders sell for £150-£350 a go plus legal costs. By the time you've added the costs of both your solicitor and that of freeholder there's another £600-£700 so you are maybe talking the difference between £660 (£600 legals + price of £60) and perhaps £1,050 at either ends of the bracket so it isn't usually worth arguing with the freeholder over the precise amount - but £2,000 is silly.

From what you have said either this is a leasehold house with a lease that has less than 100 years left or is a flat with a similar lease length where in either case the value reflects the profit that will be made at some point in extending the lease.

With flats there is some mileage for the seedier property companies to charge for all those service charge items that people are very suspicious about but can't prove are not legitimate!

Also, if it is a flat you have to club together with a majority of the flat owners to serve a counter notice saying you do want to buy and then those people have to come up wth the money. There are various procedures you have to go through so you would need a solicitor to get it right. If it is sold at auction you then collectively have a right to buy from the freeholder at the same price that it sold at the auction so the property company that is the successful bidder stands to lose its investment if you serve the notices quickly enough.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

BobProperty

CVID wrote: »

Like what, assuming the lease still has 900-odd years still to go?.....

Like I said :

BobProperty wrote: »

..... If they are asking £2000 per property then there has to be something more in it for the freeholder than £3 pa for x years.

It may only have say 90 years to go. It may have a review clause allowing the £3pa to be raised every few years. There could be a whole host of reasons but there must be at least one other than the £3pa income to make it worth around £2000.

CB1979_2

I asked this question a while ago, and basically no one could come up with a decent answer, except for if the leases start getting to a low number of years, they can make a bit from lease extensions, also all their "admin" charges.

me - "hi mr freeholder can i have a sky dish up please"
freeholder - "pay me £100 and I'll tell you yes or no"

also through running repairs/management companies they can make a bit as well.

real1314

I've seen a few "leasehold" interests go through auction sites and I'm fairly sure they tend to go for less than 10x the annual collection.

If I was being asked for £2k to cover a £3pa charge, then I'd put the £2k in a 5% interest account and have a good night out with the other £93 it would earn over a 12 month period.

If there's 100 properties, each earnig £3pa, then the whole package isn't likely to sell for much more than £2k !!

Unless there are some sneaky terms?

I'm sure that eddisons.com have sold ground rent packages in the past - have a look through their past auction results?

RainbowsInTheSpray

Just bumping this one back up to answer a few questions.

The properties concerned are typical 'between-the-wars' maisonettes - the type which look, from a distance, like your bog standard pairs of semi-detacheds. Closer up, you see that they are in fact not two houses but four flats, the two upper ones being reached via outside staircases. They were built in thousands in the twenties and thirties. This road has about 100 of them. There is, needless to say, 900+ yearsworth of lease left.

The council has adopted the road. There are no 'common areas' for which the freeholder has any residual responsibilities. As far as I can tell, the only interest the feeholder has would be in the ground rent.

The whole thing is still something of a mystery both to myself and some of the other lessees with whom I've spoken.

Doozergirl

Then they're trying it on! I have heard of unscrupulous Freeholders who will buy at auction and then try to fleece the leaseholders.

Are you sure that the freehold hasn't already changed hands without you knowing?

I cannot see any financial gain to you buying the freehold at all (which you'd have to purchase collectively as a block if you are indeed flats). I wouldn't even bother with it. They can only charge the ground rent stipulated in the current lease.

How do you presently organise maintainance of the buildings?