extend lease or jointly buy freehold?

linny1970

As the owner of a maisonette with only 50 years remaining on the lease I am now seriously looking to get it extended.... for obvious reasons.
Very generally the price will be 40 to 50K ..... so heavy duty cost!!
As the ground floor maisonette owner, I am aware that the upper maisonette owners have about 115yrs remaining on their lease. Does anyone have an opinion about whether jointly buying the freehold of the building with my upstairs neighbour or simply extending my lease is the most sensible course of action?
Many thanks if there's any advice from MSE's who've been in a similar situation.


:beer:

user1168934

In your case it will make sense to buy the freehold.

linny1970

thanks, but is that based on the cost to buy or extend being roughly the same .......... would you think?

GTG

This is my take on it, please take professional advice before making any decision.

The value of a freehold is largely determined by what the freeholder would lose by selling it to the leaseholders. This is largely comprised of what he/she/they would receive if the current leaseholders were to extend their leases under their statutory rights at the time of the valuation. I believe the theory is that a lease of over ninety nine years to expiry can be valued as if the property were freehold. The other smaller component in the valuation is the loss of ground rent to the freeholder.

On a residential property a leaseholder has a right to a ninety year extension or a lesser extension may be negotiable but only if the freeholders are willing.

As there is no or perhaps very little value in the other leaseholder extending theirs except for perhaps some loss of GR to the freeholders then most of the value of the freehold comes from your short lease.

So let's say the value to extend your lease comes to £45K then another £5k could be added on to compensate the freeholders for loss of ground rent on both flats. Divide that by two (not counting legal costs) then you will have to get your neighbour to agree to shell out £25K for his half interest. Then you will both have a 50% stake in the freehold but you will still be left with leases of the same duration. You could then extend you lease but you would still be liable to pay 50% of the valuation of the extension to the other freeholder.

I'll let you make your own mind up whether it is worth it.

linny1970

thanks GTG, that helps.
However, you say that I would have to get my neighbour to agree to shell out 50% of 50,000 (ish) ....... I disagree as the reality would be that I would bear almost all of that (as it would cost me around that to extend the lease anyway) and then we do a deal that my lease gets extended to the max possible for a nominal sum. As would theirs. Do you think this is workable, legal?
Appreciate it requires cooperation and a good relationship with my neighbour, but luckily (at this time) I have this. The big benefit to them is that they will have joint freehold ownership and a simpler path to any developments such as loft extension, etc etc.
Once again, thanks for your view, it really is appreciated.

GTG

Hi linny1970,

As far as I am aware the situation is as I have outlined above.

There are a lot of misconceptions about buying the freehold of a block of flats. You do not actually buy a share in the freehold you buy a share in the value of the freehold. Two different things by virtue of the fact that there will always be leases in place for each flat. Unlike say in the United States were flat owners or condominiums as they are called are allowed to own a share in the land beneath the block on which the condos stand. As far as I'm aware under the laws of England and Wales flats and maisonettes must be held on a leasehold basis. Don't ask me why, if you want to know the history a suggest you google "King John". If you want further clarification of this see below.

I am not a solicitor or RICS surveyor or involved in either of those professions but I am one of the freeholders of a block of maisonettes. I would strongly encourage you to give the leasehold advisory service a ring in order to get clarification on your position. It's a free government financed organisation manned by solicitors whom I have in the past found very helpful and lay person friendly. I suggest before calling you write down on a piece of paper all the questions you can think off and leave a substantial space below each one to jot down notes. You will normally be held in a long queue and typically waiting times I have found to be between 30 & 45 mins so allocate enough time for the call. As I said it is free and it could save you a solicitors bill or save you a free initial consultation with a solicitor to seek other advice. So its worth it in the long run imo.

Just one other thing, if you do contact them I would be grateful if you would report your findings back here to help other folks, including myself of course.

Cheers.