Leaseholders jointly own freehold

Bart1

Four flats in the building, each own 25% of freehold.

Am I right in thinking that the length of the lease is irrelevant?

HouseBuyer77

I think it depends precisely how the share is organised and whether there are variable lengths of time left on the lease.

Say one flat has 70 years left, the others have 100. First flat wishes to extend maybe the others will want to charge for this extension. The first flat owns 25% of the freehold so will receive 25% of this back but they could still be paying a lot for the extension.

Or if everyone's on the same length lease you'll presumably mutally agree to all extend as one, just paying for the legal fees. Though even then perhaps you'll have one flat owner who doesn't want to extend and could complicate the process.

Bart1

Hadn't considered the possibility of different lease lengths. It's a purpose built block so would think leases started at the same time.

My thinking was that they wouldn't so much extend the lease as let it run down then create a new one on expirery. Since the building is owned by the leaseholders.

theEnd

I don't think you'd let them run down. Extending all to 999 years would be the best bet.

HouseBuyer77

I believe banks do not consider the share of freehold bit when assessing mortgages. So if you're trying to sell and the lease is sufficiently low the property will be unmortgagable. If only one person is trying to sell the others may not have much incentive to help you out by extending then and there.

Hadn't considered the possibility of different lease lengths. It's a purpose built block so would think leases started at the same time.

This may not be the case. People could have extended at different times. Especially if it started life with a normal freeholder that sold the freehold to the flat owners at some point.

Also because the share of freehold is seperate to the lease the two could end up with different owners. In a repossession the bank will sell the lease, the share of freehold may remain with the previous owner (which they may not even realise and years on could be totally uncontacable).

Or perhaps during a perfectly normal sale only the lease switches hands because of incompetance or because the seller decided to hold on to the share of freehold in the hope of extracting money out of it at some point.

It could also work very well, just beware that share of freehold in no way means it's just like a freehold property and there's probably some nightmare scenarios that make it worse than standard leasehold property (all the neighbours hate each other, refuse to cooperate, even if it's in mutual interest, and each trying to extract as much money out of the freehold as possible).

Bart1

Thanks for the replies. Think I will give it a swerve. I had pretty much decided against anything leasehold anyway but wondered if this one might be less problematic.




Freehold it is for me then.

TranceNRG

Lenders do look favourably upon share of freehold flats as opposed to leasehold flats.

I recently made an offer on a share of freehold flat that had 67 years left on the lease. Initially I was worried about the length of the lease but my mortgage advisor confirmed that it wouldn't' be a problem getting a mortgage (with Natwest). However they still have a minimum number of years that they want the lease of a share of freehold flat to have (30 something years). I think the this differs from lender to lender.

So in short, the length of the lease shouldn't be an issue when getting a mortgage (but confirm with your MA) but if you don't extend it, it might put people off when selling it in the future.