Freehold purchase for long leaseholders?

wyattweb

I live in a modern, well-maintained block of 16 flats, with 985 years left on the lease. We appoint our own flat management company and pay ground rent of £30 per annum. Our issue with the freeholder is the extortionate cost of the buildings insurance which we believe has a significant commission built into it (currently we are being charged £285 per year, per leaseholder).

The flat owners AGM is coming up and we will discuss challenging the cost of this at the leaseholders tribunal. Some leaseholders have proposed buying the freehold as the solution. I have 2 questions really:

Is it worth pursuing the purchase of freehold option with such a long lease, when we only have 1 issue - being ripped off for buildings insurance?

Does share of freehold bring it's own set of problems when we might be better off sticking with a single freeholder (I am an owner occupier, many of the flats are now BTL)?

Thanks.

EdInvestor

wyattweb wrote: »

Our issue with the freeholder is the extortionate cost of the buildings insurance which we believe has a significant commission built into it (currently we are being charged £285 per year, per leaseholder).

Some commission is allowed.

Check here: https://www.lease-advice.org.uk

Is it worth pursuing the purchase of freehold option with such a long lease, when we only have 1 issue - being ripped off for buildings insurance?

Since you alreafdy have right to manage, it seems not.

Does share of freehold bring it's own set of problems when we might be better off sticking with a single freeholder (I am an owner occupier, many of the flats are now BTL)?

Yes, it can do.

Doozergirl

It doesn't seem that bad, tbh. We own the freehold of a block of four converted flats and the cost comes in at £800 and something, so it is over £200 for each flat. They are taking the Right To Manage now but we did ask the broker to shop around each year to find them the best deal - not as hard as I'd work on getting the best deal for my own house, mind!

GOP

You are probably a member of a Residents Management Company NOT a Right to Manage (RTM) Company - big difference in that if your Freeholder can direct insurance then its written into the lease that the Freeholder has the right to nominate the agency/insurer. RTM's can make their own insurance arrangements.

A typical standard "real" block policy retails around £108ish for a flat with a rebuild value of £100,000.

Rebuild values for flats vary from £60,000 to £200,000 depending on spec and location. The average rebuild value used for new flats is around £80,000ish, therefore the average flats policy (for a proper block of flats policy) is in the region of £85 a flat at that rate.

SO - You are very likely to be being fleeced and the Freeholder is likely to be pocketing at least £220 of your premium per flat at those rates. Who is your freeholder?

How do you reduce your insurance bill/arrange your own insurance without buying your freehold?

You either take the evidence to a LVT - leasehold valuation tribunal in order to have the policy deemed unreasonable and the LVT to make a decision along the lines of a) match a like for like offer you've found OR instruct the management co to make the insurance arrangements in spite of the lease.

Alternatively you could go Right To Manage (RTM) (even though you are already a residents management company). This will go you the right to place your own insurance without Freeholder direction.

Don't buy your Freehold just to beat rip off insurance.

As for the young lady posting - Shop around as £200 appears high for a 4 flat purpose built or conversion.

Doozergirl

GOP wrote: »

As for the young lady posting - Shop around as £200 appears high for a 4 flat purpose built or conversion.

The 'young lady' is the freeholder of the block. As I said, they are taking the Right To Manage anyway. I also said I didn't shop around as hard as I might for myself, but I do use an independent mortgage broker who must do some element of shopping around.

OP, you can obtain the Right To Manage at a cost of £100 per flat, so far cheaper than buying the freehold. I used one of the recommended firms at www.lease-advice.org (they are a government funded organisation so they don't advertise to their own advantage, iyswim), though if there are lots of BTLs in the block you might find that you are the one doing most of the admin unless you can all agree to instruct your managing agent to collect monies for you and you simply organise the quotes each year.

(The RTM was on a flat where we were the leaseholders, not to be confused with the freehold we own.)

wyattweb

Thanks everyone, some good advice here. I think we should investigate the right to manage option.