Short-lease house - how much is the freehold likely to cost?

lynneinjapan

We're looking at a small 2-bed terraced house with only 27 years left on the lease. Working backwards, and looking at old maps, I think it must originally have been built in 1915 and sold on a 125-year lease. It's in Birmingham and similar freehold houses nearby are selling for around £80-85K at the moment - though this one isn't in good condition so would be worth maybe £10K less. I know it's currently unmortgageable and I'm aware of the 2-year qualifying period to buy the freehold (though we might be able to get the vendor to serve notice and assign the right to us). I haven't asked what the ground rent is but I'd guess that, as it's an old house, it's probably no more than £5 per year.

Can anyone give me an indication of the likely costs involved in buying the freehold? Are we talking £5-6K, £8-10K or £15-20K... or even more?

Fire_Fox

http://www.lease-advice.org/publications/

lynneinjapan

I've seen the info on that site, thanks - specifically http://www.lease-advice.org/publications/documents/document.asp?item=15 - but it's not easy to follow, besides which I don't know the rateable value in 1965 and 1990. I know we're going to need to get professional advice if things do go further but at the moment I'm just after a rough idea of the costs, maybe from someone who's been through the enfranchisement process with a similar property.

Fire_Fox

lynneinjapan wrote: »

I've seen the info on that site, thanks - specifically http://www.lease-advice.org/publications/documents/document.asp?item=15 - but it's not easy to follow, besides which I don't know the rateable value in 1965 and 1990. I know we're going to need to get professional advice if things do go further but at the moment I'm just after a rough idea of the costs, maybe from someone who's been through the enfranchisement process with a similar property.

Rateable value you should be able to estimate from council tax banding and/ or water rates I think. LEASE really is the most plain English accurate explanation you will find without losing key details, they also have a free telephone advice line.

lynneinjapan

OK, I've now established that the ground rent is actually £35pa. It sounds as if the lease may have been extended in 1985, though if that's the case then the figures don't quite seem to match up... but it works in our favour so I'm not too worried about that!

Although I don't know the historical rateable values, from another thread on here I've concluded that the house would easily meet the "low value" criteria, so I've had a go at calculating the values based on the "original valuation basis" described in the document (it's a real-life application of geometric series, which I've just been teaching to my AS-level Maths students!), and come up with a little short of £9000, plus valuation and legal costs of course. I've also found out (from Land Registry) that the current freeholder bought the freehold three years ago for £4250 so she'll be making a nice little profit on that.

(Have also just done the same process on another property that I DID have a professional valuation for, and got a pretty good match - so you're right, it's a great document once you manage to get past the rateable value hurdle!)

How much would I need to budget for valuation and legal costs? £1000, £2000?

richardw

Is the market failing, bumping along the bottom, or rising for this house in this street?

lynneinjapan

Bumping along the bottom, I'd say. Possibly starting to rise a bit, given recent Government initiatives to boost the housing market, but who knows really? Prices haven't changed much since about 2009.