999 year lease

tim123456789

Soundgirlrocks wrote: »

Interesting, I look after a block of flats (Director of the free-holding company as well as a leaseholder) We are looking at amending the leases on the property to enable us to sell the garden. We have to consider how long to make the new leases for, I discounted 999 years as it ties the hands of any future management company. We will probably opt for 125 year leases, long enough for it to never trouble any of the current leaseholders but in say 50 years time if money is needed to maintain the block lease extensions can be charged at the going rate and the money put into the sink fund etc.

The cash in the pot for maintenance, and the cash in the pot from leasehold extensions belong to legally "different" people, and you should not be mixing them.

Your proposed solution is wrong and could see you on the wrong end of a law-suit

tim

csgohan4

tim123456789 wrote: »

The cash in the pot for maintenance, and the cash in the pot from leasehold extensions belong to legally "different" people, and you should not be mixing them.

Your proposed solution is wrong and could see you on the wrong end of a law-suit

tim

Another reason not to buy leasehold, they want to make more money from your already expensive purchase, especially for houses. Understandable for flats, but some have rubbish leases with ground rent doubling every 10 years for example

Soundgirlrocks

tim123456789 wrote: »

The cash in the pot for maintenance, and the cash in the pot from leasehold extensions belong to legally "different" people, and you should not be mixing them.

Your proposed solution is wrong and could see you on the wrong end of a law-suit

tim

The cash from the leasehold extensions belongs to the company that owns the freehold. There is no requirement in our articles of association to pay dividends to the shareholders (who are all leaseholders in the block)

The company has a responsibility to maintain the building, & can bill the leaseholders for the maintenance of that building via service charge parents, however, they can also use their own reserves.

What would be illegal is to use money from the service charge to fund any other costs of the freeholder.

Soundgirlrocks

csgohan4 wrote: »

Another reason not to buy leasehold, they want to make more money from your already expensive purchase, especially for houses. Understandable for flats, but some have rubbish leases with ground rent doubling every 10 years for example

I own a share of the freeholding company for my block so there is not profiteering we have a fund to pay for a new roof etc as and when needed. Leaseholds are necessarily evil just a lot of people don't understand how they work

HouseBuyer77

I discounted 999 years as it ties the hands of any future management company. We will probably opt for 125 year leases, long enough for it to never trouble any of the current leaseholders but in say 50 years time if money is needed to maintain the block lease extensions can be charged at the going rate and the money put into the sink fund etc

Said future management company could always raise the service charge to do such a thing, which seems more sensible. Doesn't going for the 125 year lease just mean they'll have another set of legal fees to pay next time they decide to renew without much benefit?

Raising funds for repairs based on changes to ground rents also suffers from the proplem that someone could use the statutory route to renew and their ground rent would be put down to a peppercorn.

Soundgirlrocks

HouseBuyer77 wrote: »

Said future management company could always raise the service charge to do such a thing, which seems more sensible. Doesn't going for the 125 year lease just mean they'll have another set of legal fees to pay next time they decide to renew without much benefit?

Realistically it would be 40 -50 years before anyone would need to extend again but yes there would be another round of legal fees. Service charge is the correct way to raise money - paying into a sink fund over a number of years but it only takes a period of bad management to wipe that out.

HouseBuyer77 wrote: »

Raising funds for repairs based on changes to ground rents also suffers from the proplem that someone could use the statutory route to renew and their ground rent would be put down to a peppercorn.

Ground rent is nil already, statutory route would mean paying for the lease as the market rate, its that money that then could be put into the sink fund. It is just one possible route. My concern would be tying the hands of any future management company. Lease extensions also create an opportune time to make any amendments to the leases that may be need to bring them in line with current regulations. Who knows how we will be living in 2067!

Having taken over the company that had previously been very badly run, had very little in reserves, and faced with leaseholders who won't / can't pay any more in service charges I wouldn't want to create a situation that gives future management few options.