leasehold vs share of freehold

leane_r2002

Hi All,

Am new to the site so if I have posted incorrectly bear with me.

In short we had an offer accepted on a ground floor 2 bed conversion flat. The property comprises of the ground floor and a one bed above occupying first floor. The ground floor has a single storey extension to the rear which has a flat roof. Underneath which are two bedrooms. When making the offer, we were told it was share of freehold with 999 year lease. 6 weeks later, my solicitor has received the contracts (vendor was waiting on the compliance plans) and there is no share of freehold, just the 999 year lease. In the meantime, I've also received a request from the vendor via the estate agent saying that the landlord would like to install an RSJ on the flat roof (which is above our two bedrooms) this summer to allow the flat above to be extended at a future date. However, should we not agree the vendor would not pursue the works.

I'm now having major doubts about the purchase as I feel the property has fundamentally changed since we made our offer.

My main problem is that as a leaseholder, I have no say in whether the flat above is extended above the rear of my (potential) property. (Apparently The lease states I would only own the interior walls and ceiling, the rest belonging to freeholder) But as a freeholder I would have had some say and therefore could potentially not agree to the works?

To get this far along and be hit with new info leaves me in a tricky situation. Both the agent and vendor know that our existing property is ready to complete in a few weeks so we could potentially lose our sale if we pull out now.

Advice please????

leane_r2002

I should also state that the vendor owns both flats which until now have been rented out so both are being sold with new leases.

zagubov

Nope. If you're getting this kind of treatment right now, how bad's it going to be later on? You can't spend the next year(s) waiting for the second shoe to fall. I'd walk, even this close, because I'd never feel anything good about the place.

Giblets

Agree with the above, things are changing by the minute.

if you are happy to have the RSJ, and an extension of the flat above, then go ahead, however I would have grave concerns about this. Even if you are happy, it may be worth attempting the renegotiate the prices based on the new information.

bouicca21

Surely it will need more than just an RSJ? Deeper foundations?

AnotherJoe

Go with your gut feeling, and walk away.

AdrianC

leane_r2002 wrote: »

When making the offer, we were told it was share of freehold with 999 year lease. 6 weeks later, my solicitor has received the contracts (vendor was waiting on the compliance plans) and there is no share of freehold, just the 999 year lease.

"Share of freehold" is still leasehold.
It's just that, as well as the lease, you own a share in the company that owns the freehold. This is totally separate from the lease itself.

In the meantime, I've also received a request from the vendor via the estate agent saying that the landlord would like to install an RSJ on the flat roof (which is above our two bedrooms) this summer to allow the flat above to be extended at a future date. However, should we not agree the vendor would not pursue the works.

And what if that request came through from the freeholder a week after you exchanged, instead of before?

I'm now having major doubts about the purchase as I feel the property has fundamentally changed since we made our offer.

Has it? How? The property is the same. The lease is the same. The same company owns the freehold. The only difference is whether you own one share (of how many?) in that company.

My main problem is that as a leaseholder, I have no say in whether the flat above is extended above the rear of my (potential) property.

You can object to the PP application, of course. But it sounds as if you have the chance to veto it anyway, from the way you describe the request that's been passed to you.

(Apparently The lease states I would only own the interior walls and ceiling, the rest belonging to freeholder)

That's the normal situation, yes.

But as a freeholder I would have had some say and therefore could potentially not agree to the works?

If there are, say, 10 flats, you get one vote of ten. Assuming it's one-share-of-ten-per-flat, rather than by floor area, or there being another shareholder with, say, 50% of the company, or whatever else might dilute your vote.

Both the agent and vendor know that our existing property is ready to complete in a few weeks so we could potentially lose our sale if we pull out now.

Advice please????

What do you want to do?

G_M

I assume the freehold is owned by the seller, who you say is selling both flats.

Are you sure he does not intend to either

* set up a new company to own the freehold, with the leaseholders o the flts being the company's shareholders (ie they'll own the freehold)? This is common.

* sell or transfer the freehold into the joint names of the 2 new leaseholders?

The alternative is that he sells the 2 leases but keeps the freehold, which is possible but (I think) less likely).

Do you want all the inconvenience of building work above your bedrooms? And then the extra noise from above once it's complete?

Was the extension originally built with a further storey in mind? If not, the foundations will not take the extra weight.......

leane_r2002

Thanks for all of the replies. In short I know nothing other than receiving a request through the agent re the RSJ and a possible future extension. A day later contract turns up stating that I would be a 999 year leaseholder, as opposed to owning a share of the freehold. The Agent is now being reluctant to answer any questions. from the info that I have, it would appear that the vendor has changed his mind and decided to retain the freehold.

i had hoped I could get a simple answer from the agents as to why the the tenure had been changed but j guess we will need to go through solicitors to obtain more facts and make a decision from there.

AdrianC

leane_r2002 wrote: »

A day later contract turns up stating that I would be a 999 year leaseholder, as opposed to owning a share of the freehold.

I'll repeat...

As a part-owner of the freehold, the property IS STILL LEASEHOLD.
Your property purchase is no different whether you are also buying a share in the company which owns the freehold or not.

AlexMac

I'd be cautious, but, if you like the flat, and as it was originally advised to the EA that it was shared freehold, is it too late to re-negotiate back to that position? i.e. Suggesting that the vendor just hand it over to the two leaseholders? After all, there's no joy and little profit to a remote freeholder on a 2-flat unit, as they'll have all the hassle of insurances, statutory checks, and chasing service-charges, commissioning satutory safety checks and works and chasing apportioned one-off shared costs of major repairs like roofs, one-off and cyclical major mainteneance like external decs...

Presumably as the new leases are already written the identity of the existing freeholder is clear to you and your solicitor? And I assume that it's either the vendor acting as an individual or as a company. In which case you're probably correct in assuming that you would not be able to veto conversion or expension of the upper flat.

In fact, it begs the question of what the vendor is trying to achieve? A bigger sale price for the upper flat if he undertakes the conversion in the next few months? A premium on the sale because it's being sold with the advertised potential (and a guarantee of freeholder permission?) for future conversion by whoever buys the lease?

Without an indication of the vendor's plans, or without the security that a shared freehold brings, I'd walk away. I've owned five leasehold properties over the years and although I'm very happy with the Local Authority as (a competent and reasonable) freeholder of my two little BTL ex-Council flats, I'd not buy anything other than a "shared freehold" for my own use or occupation as I caouln't cope with the lack of control!

I was in a similar position to your vendor 15 years ago. I bought the freehold of a wreck of a house which had previously been converted and where the basement flat had been sold off on a long lease. When I came to sell I a few years later I considered doing what your vendor plans; retaining the freehold but not the leases. I was advised that it just wasn't worth the hassle!

So maybe try it on- after all, wheover buys the upper flat may feel they've been sold a pup when the downstairs neighbour (you) opposes any panning application they might make (although one may not be required), then starts creating when their builders sart to knock the place to bits!