Option to purchase freehold title (Enfranchisement)

Biggie

Just had a letter from the management company informing me of the option to purchase the freehold title (Enfranchisement).

Details are :-

Cost of freehold- Approx 3.5k - 4k
Current lease: approx 98 years
Ground rent: £150 p/a
Flat details: 2 bed in Camden (North London) worth about 250k

The flat is a buy to let, so would only be worth it if I make some money out of it.

So do you think it's worth it what's the benefit except the abolishement of ground rent. Would the value of the flat increase ?.

Doozergirl

How long do you intend to keep it for? The lease should probably be renewed in about 15 years time.

At that price, I'd consider buying it. You can save a fortune on maintenance costs and buildings insurance by having the freedom to shop around. You no longer pay a managing agent for doing next to nothing and charging you for every query you have with them.

Also, if they are offering it to you, they will probably plan to sell it to someone else if you don't take them up. The buyer may emply a more ownerous agent who will up or introduce your service charge. If you don't surrently pay one, check that your lease definately covers who is responsible for maintaining what.

You can have your own, independent valuation carried out to confirm the price, but I would also still haggle with them. You will have to pay both your own and their legal fees, so add about £1000 to the cost of the freehold itself.

I'm not sure whether it would increase value - it would increase saleabilty certainly.

Biggie

I will probably keep the place another 10-15 years.

There appears to be plenty of time on the lease at the moment from memory it's around 100 years.

Also the current service charge is quite resonabile 80 p/m which is fine by me and I don't have to bother with any thing if it increases a little then as long as it covers it's costs i'm not overly concerned.

It is a buy 2 let so if it doesn't increase in value because of the freehold then i'm more inclined to not purchase it. If I was living in the property I would definitly purchase it. For a buy to let i'm not so sure

Richard_Webster

You can't and shouldn't buy the freehold of a flat on your own. A freehold of just your flat without it also being of the building as a whole would be unmortgageable.

You would have to club together with other flat owners to buy. If you have had a formal "right of first refusal" notice then there has to be a majority of flat owners agreeing to buy (usually through a company that you set up) and there are some other conditions.

I am assuming that the approx £4K cost is per flat. However, if any of the others don't want to join in then the cost for the rest of you goes up because you will effectively have to pay for that person's share. Given the length of the lease remaining my guess would be that a number of the others won't be interested and therefore it would become less attractive for you because the cost to you will be greater.

I don't know the London market suffciently to be able to say whether you would definitely recoup your expenditure by being able to put "share of freehold" in sales particulars when selling in the future. My guess would be that for any given type of property and area there is a band of prices where those with all mod cons etc are towards the top - "share of freehold" simply moves the flat up somewhat within this price band.

So you need to decide what YOU think about it but also you may have to persuade the others as well in order to reduce the overall cost to you if you decide to go for it.

What is your present landlord like? If he/it wants to sell the freehold then if the flat owners don't buy it then some rip-off property company may do. That alone may be a reason for buying - but again you would have to persuade the other flatowners about this.

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

Biggie

thnks Richard Webster

You're right currently they're estimating costs of 3.5k - 4k on the assumption that 70% or more agree.

There are a number of blocks currently 4 blocks which have around 80 flats in total. 2 of the blocks have alread been completed.

Currenlty i'm being asked to vote on the purchase of the share of freehold.

My guess is that I will recoup most of the costs in 10 years anyway though the saving of ground rent, reduced insurance preimiums and reduced service costs.

I come out of a 5 year fixed rate mortgage next years so I guess I can just remortgage and stick the cost onto that.

I guess I could vote for a yes and then back out if the cost is going to be too much.