Share of freehold maisonette - is it worth having lease extended before purchase

plastics

Hi All.

Had an offer accepted on a upper floor maisonette which has an attic we want to convert for additional living space.
It is share of freehold (presumably with the ground floor maisonette owner), but with only 87 years left on the lease. It commenced with 100 years from 2001, although property itself was built in 1890s.

My queries/concerns:
- when the current owner bought it 5 years ago, with its freehold interest, why wouldn't he want to buy it with a longer lease, typically 999 years and 'peppercorn' ground rent?

- I've tried to answer my question above myself with another question - surely if you own part of the freehold, why does the length of the lease materially matter? I understand it matters if someone else is the freeholder, because as it expires to zero, it will eventually revert to the freeholder and so will cost more to extend with time. But if you are the co-freeholder, does it really matter how long the lease is? Isn't the lease is just there as an agreement between the two co-freeholders/leaseholders about the management of shared parts, access, repairs etc.?

- if the length of the lease does matter despite being a share of freehold, then presumably we need to ensure this is extended by the current vendor as a condition of the sale, given that we would have to wait at least 2 years and get the agreement of the co-freeholder at that time to extend it ourselves later?

- finally, I don't understand why any co-freeholder would object to extending the lease, given that it would be of benefit to them as well? Is there any reason why the other freeholder might be reluctant to participate in extending the lease, and would rather let it dwindle and expire further?

Sorry a bit longwinded, hope there are some clued up people out there!
Thanks

TrickyDicky101

If the leases have different maturities or ground rents then it will matter a great deal. What entity actually owns the freehold I.e. Is it owned by a company or by the two existing leaseholders jointly?

bizzybee

Who "owns" the roof space that you plan to extend into?

katejo

Did not think that 'share of freehold' existed. Usually it is leasehold or share of common hold . Think you should ask solicitor to check facts. I had a similar maisonette which was leasehold and the new lease was 99 years when I bought it. I would have needed permission to extend into the loft.

plastics

Thanks for the replies
I am assuming that the owners of each maisonette are on the title of the freehold if the agent is talking sense - I will be checking it on Monday

Not 100% sure who owns the loft - the agent has specifically said the loft belongs to the upper maisonette so there is room to extend STPP, and again will need to check the details of this on the freehold title?

As a legal entity share of freehold doesn't exist (i don't think); this is a leasehold maisonette, but the leaseholder also owns the freehold interest in that part of the building, rather than someone else. I understand that the freehold is owned by the two leaseholders - although cannot be 100% certain that the maisonette below hasn't got a different leaseholder and different freeholder - again will check this on the freehold title.

Will definitely get lawyers to scrutinise - but just wanted some thoughts on the above, with regard to value of extending lease for someone who is a freeholder anyway? Why does it need to be extended, if the property reverts to the freeholder on expiry of the lease (i.e. me)?

TrickyDicky101

plastics wrote: »

Will definitely get lawyers to scrutinise - but just wanted some thoughts on the above, with regard to value of extending lease for someone who is a freeholder anyway? Why does it need to be extended, if the property reverts to the freeholder on expiry of the lease (i.e. me)?

If you have two separate freeholds, each attaching to each flat individually then it will be unmortgagable so unless you are a cash buyer you won't be able to buy it.

If both maisonettes are owned by the one freehold then the reversionary value of the maisonette once the lease matures will go to the owners of that freehold (and there are two of you if both leaseholders own the freehold jointly). If the leases carry different lengths, then the owner of the longer lease is in a much stronger position than the other (as he will be getting half the other property's value in a shorter time than his counterpart freeholder who will have to wait longer (much longer?) for his own lease to mature).

I believe depending on where you are buying this property there is also the possibility of 'cross-over' freeholds (that may be the wrong name) where each leaseholder owns the freehold of the other leaseholder.

plastics

TrickyDicky101 wrote: »

If both maisonettes are owned by the one freehold then the reversionary value of the maisonette once the lease matures will go to the owners of that freehold (and there are two of you if both leaseholders own the freehold jointly). If the leases carry different lengths, then the owner of the longer lease is in a much stronger position than the other (as he will be getting half the other property's value in a shorter time than his counterpart freeholder who will have to wait longer (much longer?) for his own lease to mature).

Perfect, that makes sense. So presumably, if both leaseholders have a lease of the same length, there would be either:
a. no big rush to try and extend the lease even if it is short, given it reverts to them at the same time
OR
b. if we do want to/need to extend the lease, the other co-freeholder and leaseholder should have no reason to object to that as it will also advantage them (if extending the lease on a shared freehold property is of any value at all)

propertyman

plastics wrote: »

Perfect, that makes sense. So presumably, if both leaseholders have a lease of the same length, there would be either:
a. no big rush to try and extend the lease even if it is short, given it reverts to them at the same time
OR
b. if we do want to/need to extend the lease, the other co-freeholder and leaseholder should have no reason to object to that as it will also advantage them (if extending the lease on a shared freehold property is of any value at all)

Oh dear God NOOOOOO:eek:

http://leaseholdpropertymanager.blogspot.co.uk/2013/07/i-have-share-of-freehold-no-you-dont.html

http://leaseholdpropertymanager.blogspot.co.uk/2013/07/extend-my-lease-i-have-share-of-freehold.html

plastics

Thanks for the blog, but arghhh- spend weekend researching this, finally thought I got it clear and now I am back to square one!!!

So, what you are saying is that even if you have this freehold interest, the length of the lease is still valuable and important because the co-freeholder may not wish to extend the lease with you because they are waiting for it to expire for a 'payday' and therefore may also demand a premium to extend it?

But what 'payday' will they get? Surely a freehold flat without a lease is even less valuable because very few lenders will even lend on it. So what is it that such a freeholder gets, by allowing their lease to continue to expire??

Would you say therefore, that a flat where you are getting part of the freehold title and an 87 year lease, is less valuable than a fully leasehold flat, with no ownership of the freehold, with 110 years lease? (all other things being completely equal!)