Buying a Shared Freehold Flat

propertyman

Richard_Webster wrote: »

The trouble is that you go to a lender (particularly a branch office or through a broker) and mention the words "freehold" and "flat" and they immediately get confused because they have been told they don't lend on freehold flats. They don't. This probably isn't really freehold flat. Propertyman is trying to find the person who invented the term "shared freehold" because of the confusion it can cause..

Its largely because as there is only leasehold or freehold, using a made up term is hopeless as it inevitably ends up as "freehold" which is no no for most lenders.

I havenbt given up Richard but as it is was an Estate Agent they are likely by now selling burgers or double glazing.:cool:

propertyman

camulus77256 wrote: »

Thanks for all your feedback. It has been very helpful. The property is 50/50 shared freehold with each flat owning a long lease also. My question now would be how does this affect mortgage prospects. The Freehold is owned by those occupying the flats rather than a company.

How does the value of the freehold compare with the leasehold.

And yes I totally agree with propertyman's opinion of "shared freehold" it should be removed.

Ok so as forecast its along lease and the freehold is owned jointly not 50/50. Another example of forcing ones expectations on a situation....

As you are only borrowing on the lease then it present no issue to your loan or purchase price unless the lease is less than @90 years left to run. How long is it?

benjus

I've been looking at leasehold flats to buy, some of which are sold with a share in the company that owns the freehold. The vendors and agents have always been very clear about what that means, and at no point have I been led to believe that I would be buying a freehold flat.

Not sure why there is so much confusion over this...

Larsson67

benjus wrote: »

I've been looking at leasehold flats to buy, some of which are sold with a share in the company that owns the freehold. The vendors and agents have always been very clear about what that means, and at no point have I been led to believe that I would be buying a freehold flat.

Not sure why there is so much confusion over this...

Likewise.

We've owned a share of freehold flat for over 5 years. In that time we've mortgaged the purchase, re-mortgaged and are now in the process of selling all with mainstream lenders without any issues or confusion.

We've had 3 different solicitors conveyancing and not once has there been any problems, confusion or additional costs.

http://www.in-deed.net/conveyancing/conveyancing-articles/share-of-freehold-conveyancing

Having owned both leasehold and share of freehold properties we have much preferred the later as there's been no ground rent and we've controlled the costs.....a nice bonus, due to the additional contact, is all the owners have gotten to know each other and have become good friends, which was rarely the case in our previous flats.

The only minor downside is each flat has taken on minor duties i.e organising the cleaners/gardeners but our monthly service charge is about half the cost of other standard leasehold developments in our area, so nobody is complaining.

propertyman

Larsson67 wrote: »

Likewise.

We've owned a share of freehold flat for over 5 years. .

Well no you haven't as there is no such thing. Its freehold, leasehold, and commonhold and thats it.

It is a shorthand which is trying to communicate a simple idea you own a flat and the freehold is owned by either a group of people or a their company.

This is a sop to owners, and while the professionals can pick apart what is really being sold/bought, it leads to the sort of confusion above where buyers and lenders end up in problems and confusion.

This is particularly acute when buyers of share of freehold property suddenly discover the lease is 74 years long and they are hard pressed to get a mortgage and have to pay a premium over an above the asking price to extend the lease.

it also creates a problem where the seller is valued by Tim Nice but Dim in his Mini Cooper car, failing to understand that the lease length is vital to the selling price. it is the overvalued as a longer lease and not one of 74, and falls apart when the lease needs to be extended. That's of no help to buyer or seller who have to start over or find money that they didn't plan to spend.

All the agents particulars need to say is

Flat Leasehold X years GR £X SC £Y
The freehold is owned by (either) a group of people/ the residents company.

Richard_Webster

This is particularly acute when buyers of share of freehold property suddenly discover the lease is 74 years long and they are hard pressed to get a mortgage and have to pay a premium over an above the asking price to extend the lease.

Most lenders will lend on 74 years but a prudent buyer would be advised to consider the situation when he comes to sell and it is under 70 years. EAs usuaully say that there's no problem at all - "you can extend your own lease...."

Er,No. If there is residents company and it is prepared to do so it can extend the lease and it may decide not to charge for this. Usually it won't but the bottom line is that a majority vote will decide.

If the freehold is literally owned by the individual flat owners then they all have to sign any extension deed. So if one of them won't for some reason or has disappeared you have a problem. Sometimes one of the flat owners refuses to sign because "we haven't got leases - this is a shared freehold"!!!

Also if your lease is the only one that has not been extended the others may "gang up" on you and require a payment for an extension. Your only right to an extension is after you have owned a flat for 2 years and then at a price calculated as laid down by statute.

So one of the myths about "shared freehold" is that there is some law that requires automatic lease extensions at no cost. In most cases it may be in the interests of all concerned to agree to this but it isn't automatic and cannot be compelled by law.

Larsson67

propertyman wrote: »

Well no you haven't as there is no such thing. Its freehold, leasehold, and commonhold and thats it.

This isn't my flat but the Land registry disagrees with you.

http://www.zoopla.co.uk/property/upper-maisonette-at/33-taybridge-road/london/sw11-5pr/27488576

More importantly, I had a jaffa cake with my lunch my colleague claims it's a biscuit. Mentalist.

propertyman

Those are estate agents particulars not HMLR:p..... There are only three types of tenure in England and Wales freehold, leasehold, and commonhold.

Law of Property Act 1925- not a mentalist- you have been "lawyered"

propertyman

Richard_Webster wrote: »

Most lenders will lend on 74 years .......
So one of the myths about "shared freehold" is that there is some law that requires automatic lease extensions at no cost. In most cases it may be in the interests of all concerned to agree to this but it isn't automatic and cannot be compelled by law.

But then those with higher LTVs will experience more difficulty.

I don't think the "er no" applies here as the response was predicated on "it never presenting a problem" and I have shown, in that reply, where it can.

The EA saying that you can always extend the lease overlooks the problem of their pricing a 74 year lease as say a 125 year one, when a buyer should be paying less for the former.

On the rest we have discussed this before and I heartily agree.:beer:

Joanthebone

No such thing as a 'shared freehold'?


Some years ago my mother lived in a downstairs flat, in a detached building with just one flat above, occupied by another old lady.


Both leases had run down to just over 60 years when the freehold became available at auction. My mother and her neighbour won the auction, paying half each for the freehold.


They then both had long leases made up. They stopped paying their ground rent and became responsible for all maintenance (they always were anyway). So what would you call that? Freehold or leasehold? The property has just been sold, advertised as 'share of freehold', should it have been advertised as 'commonhold'? - which I have never seen when property-hunting!?