Buying the freehold on flats - good idea?

jp1181

MY partner has a flat in a block of 12 flats which she rents out but is considering selling at some point, currently the lease that has about 70 years remaining.

Will a lease of 70 years (I think it's 74) mean buyers would not be interested? (I would be wary if I were a buyer but I am a worrier...)

One of the flat owners is proposing that the flat owners should club together and by the freehold. She has been quoted a price of approx £80k + legal expenses. (So approx 10k each at most hopefully)

Would this be a good move rather than just individually buying extensions to leases on the flats?

Is it possible to do if not all 12 flat owners are in a position/willing to do it?

hazyjo

She would still have a lease, even if she does own a share in the company that owns the freehold. It would still need extending. Not many mortgage providers would lend on 70-ish years.

I'd probably just be looking at extending the lease.

Jx

partialycloudy

I think in a block at least 50% of the flats have to agree to the purchase of the lease. (someone will correct me if I'm wrong)
PROS
You and the other owners have full control over works that need doingand the costs and setting the ground rent, fees etc
CONS
If a few flats dont agree on getting major works done this could lead to tribunals etc. and fall outs with other neighbours.

We are in the middle of buying our lease (but we are only two flats) and I think it will make it more attactive to a buyer (atleast I hope so) as they do not need to deal with a management company that has no real vested interest in the property, except to collect ground rent.
We also got a price for extending the lease and there was only £1000 difference so we thought it would be best to buy it and have more control.

jp1181

When you say she would still need to extend her lease, as she would be a shareholder in the freehold, presumably it wouldn't cost so much to do so?
Couldn't the new owners of the freehold increase the leases on all the flats to, say, 999 years? Would there be anything preventing them from doing this?

Richard_Webster

When you say she would still need to extend her lease, as she would be a shareholder in the freehold, presumably it wouldn't cost so much to do so?
Couldn't the new owners of the freehold increase the leases on all the flats to, say, 999 years? Would there be anything preventing them from doing this?

If the shareholders in the company agree, then they do not have to charge each other for extending the leases. Best to get it done soon after acquisition of the freehold otherwise if some have extended and you haven't they could decide that they do want to charge, and if you are in a minority you can't stop them!

tim123456789

jimmiepreston wrote: »

When you say she would still need to extend her lease, as she would be a shareholder in the freehold, presumably it wouldn't cost so much to do so?
Couldn't the new owners of the freehold increase the leases on all the flats to, say, 999 years? Would there be anything preventing them from doing this?

To be able to do this would be the "normal" reason for enfranchising

It is much more valuable than any "management" advantages.

Though as I have said before, it is odd how many people don't do this.

Of course, you don't extend the lease of those people who don't contribute (equitably) to the enfranchisement. You will have paid the old FH for their "reversion" value and they now owe it to you instead.

Leaseman_2

Getting 6 or more of the leaseholders in a block of 12 flats to collaborate can be as difficult as herding cats. You need a longer lease and should definitely look into making a formal application by serving a S42 notice. This would then put you in control of your own destiny rather than potentially hanging around letting your lease get shorter and watching the cost of enfranchisement or lease extension rising. Whichever route you take make sure that you have a suitably experienced solicitor and surveyor/valuer advising you.

Richard_Webster

Getting 6 or more of the leaseholders in a block of 12 flats to collaborate can be as difficult as herding cats.

What a good analogy! I agree it can be very difficult. You tell them what it will cost if all 12 join in and then when only 6 or 7 agree some of them realise it will cost around twice as much as they expected and pull out and you are left with less than 50%!

jp1181

Thanks for the advice so far, helpful stuff.

I think that as the lease is currently at 74 years, the longer it is left the more it's going to cost, so we're thinking it might be best to just sort it now and extend the lease. Especially as it has taken two years to get to the point where 6-7 of the 12 are interested in purchasing the freehold, but no more than that.

We were quoted about £5000 by the current management company about 5 years ago when the lease was at 79/80 years to extend to 99 years.

However I believe that as we have owned the flat for more than two years, we have the right under the 1993 Leasehold Reform Act to extend the lease by 90 years? Meaning we should be able to extend to 164 years? Would this cost more or do the freeholders have an obligation to extend my this amount for a reasonable price? (worried that if they want 5k to extend by 20 years, they might want silly money to extend by 90 years)

Also what is an S42 notice?

thanks!

Leaseman_2

Good plan!

A S42 Notice is your formal demand for a new lease (for a term of 90 years plus your current unexpired term) at a peppercorn ground rent.

Best place to get a more thorough explanation:
http://www.lease-advice.org/publications/documents/document.asp?item=8

There are a few traps to correct service which can catch out even solicitors so use an experienced lease renewal solicitor to act for you.

You should instruct a valuer to give you an offer figure to put in the notice. the freeholder will probably come back with a ridiculous figure in a counternotice (get your solicitor to check the validity of any counternotice in case the freeholder has slipped up on the formalities) and then (usually) matters get resolved by negotiation at a mutually acceptable price.