Should we buy the freehold?

salbob80

We own a leasehold new build apartment bought in 2007 which we currently rent out (we had to move to the other side of the country for work and weren't able to sell so had no choice). The rent we receive just about covers the mortgage payment but not the service charge which we have always felt was quite steep when we compared rates with friends in similar blocks in the area. However, last week we received a letter from the owner of the freehold to our block offering to sell the freehold to the owners of the flats. It would cost us about £4k each in total. We're wondering how owning the freehold would affect the value of the property, how would we go about contacting the other flat owners (a >50% majority is required to go ahead with the purchase and most of the flats in the building are now rented out), and how difficult it is to go about appointing a new management company if we could, in fact, get one cheaper.

Sorry for lots of questions, any advice is greatly appreciated! Thanks.

SailorSam

I've never lived in a flat and one of the things that would put me off buying one is the high service charges i've read about, so i think it's a good idea to own the freehold.
Having said if everyone owned the freehold you'd have to come to some sort of agreement to, replace light bulbs; do gardens; clean windows; repairs in common areas.

Richard_Webster

Collectively buying the freehold is a good idea because it gives you a level of control and keeps you away from some of the toxic freeholders and managing agents out there.

Problem usually is getting a majority of flat owners to see it that way.

Even if you circulate all the other lessees and try to frighten them with "If we don't buy it we will get a terrible new freeholder and managing agent who will rip us off right left and centre..." it will still be difficult to get a majority together, particularly if a number are investors.

There will be a total cost for the freehold plus legal costs and the more who contribute the less it gets for each but what can happen is that some say they will buy in assuming the cost will be £XXXX because they assume everyone will join in, and then when they find that there aren't so many and that means that the cost will be nearer £2XXX they pull out and you either lose your majority (if you ever had one) or the cost goes up and more pull out!

Sorry to be a bit if a Jonah but you do need to go into this with your eyes open.

propertyman

Richard_Webster wrote: »

Collectively buying the freehold is a good idea because it gives you a level of control and keeps you away from some of the toxic freeholders and managing agents out there. .

And straight into the arms of toxic residents management companies who don't know what they are doing,
-spend money on carpets and hallways when the roof is leaking,
-and bully owners over their door knockers not "complying with the rules" while the sparks fly every time you turn on the stair lighting
- spend the entire reserve fund for the structure on landscaping and trees, which leads to subsidence

Just seeking some balance for the many toxic RMC's who I have had the task of turning around

In short the purchase of the freehold will often give residents the opportunity to make decisions about what they spend and how much.

However to say "its more than next door" is not sensible - a local burger chain costs less than Jamie Olivers or a Wetherspoons but they are all different in needs and service levels.

Very often what needs to be done is different to what residents want to do as a high service charge can equally be about overcharging, or a sensible charge with a high service level and reserves for the long term, as it is about doing the bare minimum.

In short you get to choose, it will improve value, if well looked after, as a purchaser " values" self management.

As for contact ask your tenant to look out for letters from neighbours or ask them about the freehold so you can contact the others. Alternatively write a letter and hand deliver it to the block.

Richard_Webster

And straight into the arms of toxic residents management companies who don't know what they are doing,
-spend money on carpets and hallways when the roof is leaking,
-and bully owners over their door knockers not "complying with the rules" while the sparks fly every time you turn on the stair lighting
- spend the entire reserve fund for the structure on landscaping and trees, which leads to subsidence

Just seeking some balance for the many toxic RMC's who I have had the task of turning around

I don't disagree - if the residents don't know what they are doing and don't take proper professional advice then all kinds of horrors can happen (including getting their RMC struck off!) - but there are plenty of reputable managing agents who can help them and unless they really know what they are doing then they should employ one.

Fire_Fox

Loads of information here http://www.lease-advice.org/publications/
Note that you can query and challenge service charges even if you do not decide to purchase the freehold.

robbie34_2

i am considering purchasing a house at auction but the property is leasehold with 54 yrs left, would i be entitled to purchase its freehold and how much should it cost its a 3 bed semi

Fire_Fox

robbie34 wrote: »

i am considering purchasing a house at auction but the property is leasehold with 54 yrs left, would i be entitled to purchase its freehold and how much should it cost its a 3 bed semi

Welcome! How long is a piece of string question, probably quite pricey. You are not entitled to buy the freehold unless the owner wants to sell, only entitled to extend the lease after owning for two years. See the LEASE website already linked to. That short a lease is unmortgageable, are you a cash buyer?