Potential freehold purchase / co-lessor has a short lease

daveystew

I live in a 2-up / 1-down and we've been given the opportunity to buy the freehold.

We had a great solicitor on it, but unfortunately, no sooner had we instructed him to continue, he's had to go on holiday for 3 weeks, and his partners don't seem able to advise.

The question I would like some help on is:

I have a long lease (~190 years), my co-lessor has a short lease (~60 years) so I understand that it is soon going to be very expensive for him to extend, probably in the region of 80K considering his place is now worth about 650K

That being the case, if we went in jointly, would any future extension by him be split equally between us, effectively netting me ~40K (minus purchase costs) ?

I know there are other things to consider, but I've not yet been able to get advice on this, and apart from any control we would get over the property, there's not that much tempting me to go on with it.

Thanks,
Dave

da_rule

You could both grant yourself 999 year leases for free and you can control your own service charges etc.

In theory you could force him to go down the statutory route for extending the lease but that doesn't really seem fair.

Could he end up buying the freehold himself? If so it's probably better to be in the tent.

Also, he could make it a term of the purchase that the current freeholder extends the leases to 999 years just before he sells the freehold.

TrickyDicky101

da_rule wrote: »

You could both grant yourself 999 year leases for free and you can control your own service charges etc.

In theory you could force him to go down the statutory route for extending the lease but that doesn't really seem fair.

Could he end up buying the freehold himself? If so it's probably better to be in the tent.

Also, he could make it a term of the purchase that the current freeholder extends the leases to 999 years just before he sells the freehold.

I materially disagree with the comment that it isn't fair - if OP is paying for a freehold the price has been agreed on the assumption that the F/H will benefit from the future extension payment.

It isn't the OP that's caused this unequal situation - it is the other leaseholder that hasn't extended.

Do you think the OP should get a refund from the current F/H for the extension on his lease that was effected in the past? If not, then the other L/H will benefit much more from the F/H purchase in the circumstances you describe.

Sure the L/H could be extended before sale of F/H - but then OP will only agree to pay proportionately less for the F/H as it will be less valuable to him.

da_rule

TrickyDicky101 wrote: »

I materially disagree with the comment that it isn't fair - if OP is paying for a freehold the price has been agreed on the assumption that the F/H will benefit from the future extension payment.

It isn't the OP that's caused this unequal situation - it is the other leaseholder that hasn't extended.

Do you think the OP should get a refund from the current F/H for the extension on his lease that was effected in the past? If not, then the other L/H will benefit much more from the F/H purchase in the circumstances you describe.

Sure the L/H could be extended before sale of F/H - but then OP will only agree to pay proportionately less for the F/H as it will be less valuable to him.

I guess it comes down to price, how much the freehold is currently being offered for.

There is also the counter argument that the other leaseholder may not want to purchase the freehold if he cannot extend his lease. It would then be up to the op to decide if he can/wants to purchase the freehold alone.

daveystew

Hi everyone,

Thanks for your input.

I have finally managed to get some advice from another office (of the solictor who is on holiday) and it's that we would get a surveyor in to value both places, who would then make additional calculations based on lengths of leases etc, which would determine the apportionment of freehold purchase price (32K).

This seems fair, and I'd be especially open to it, if it was in the region of a few thousand.

Either way, my co-lessor stands to avoid a very expensive extension.

The current plan is to get the surveyor in tomorrow to find out.

Any more advice is welcome though!

G_M

It seems fair that the L with a short lease should make a contribution for extending his lease. Either to the current freeholder, or to the new, joint freeholders who would share the money.

daveystew

So, to follow up on this, I got the surveyor in and got the following result:

• I pay £500
• He pays £31,500 (though saves 40K as it would have cost this much to extend)

This all had to do with the disparity of lease durations, and marriage value calculations.

Very glad I got the surveyor in, in the end!

Result.

Tom99

[FONT=Tahoma, sans-serif]That sounds sensible. Did the surveyor say what assumptions he had made about what happens to your neighbours current lease? I assume that as part of the freehold purchase his lease would need to be extended to at least equal the length of your lease.

[/FONT] [FONT=Tahoma, sans-serif]I am also interested in how you are going to own the freehold as I have a relative in a similar situation. Are you both just going to own it as tenants in common 50/50 rather than some complicated Ltd Co structure?[/FONT]

daveystew

Tom99 wrote: »

[FONT=Tahoma, sans-serif]Are you both just going to own it as tenants in common 50/50 rather than some complicated Ltd Co structure?[/FONT]

That's what's being suggested, but we have yet to confirm. We'll extend the lease to 999 years though.

Additionally, most of the clauses / wording in the existing lease now looks to be redundant, so our next investigation is whether to get the lease rewritten, and if so, what to put in. There are various omissions in the original document to do with things like common areas and attic space, and we need to draw up sensible guidelines for how things are handled in future.

Fun fun fun... I'll see what I can't report back with