Apportioning cost of buying freehold

bouicca21

We are starting to talk about buying the freehold of our block. The flats themselves are identical but the leases are of different lengths, which means the notional value of the freehold per flat will also be different.

So what is the fairest way of splitting the cost? Does everyone pay the same irrespective of the length of their leases? Or do the long leaseholders pay less? Presumably the legal costs etc should be split equally?

And how do we find a specialist surveyor to value the block?

eddddy

As you suggest, the leaseholders with longer leases should pay less.

One way to calculate how much is leaseholder should pay is to use the statutory valuation formulas, as described here:
https://www.lease-advice.org/advice-guide/collective-enfranchisement-valuation/

As for finding a specialist valuer, you could investigate the firms in LEASE's directory: https://directory.lease-advice.org/

Tom99

[FONT=Verdana, sans-serif]Buying the freehold and extending the leases are two different transactions and trying to do both at the same time will involve a lot of calculation and negotiation.

[/FONT] [FONT=Verdana, sans-serif]I would think the best way forward might be for the freehold to be bought by a company set up for that purpose with each leaseholder owning 1 share and the cost split equally.

[/FONT] [FONT=Verdana, sans-serif]Then each leaseholder can if they wish extend their lease and pay the premium to the freehold company, the freehold company then allocates that sum equally among all the leaseholders including the lease being extended.

[/FONT] [FONT=Verdana, sans-serif]Your original idea would of course be ideal but only if all the leaseholders want to extend their lease and all the lease extension prices can be agreed with everyone involved.

[/FONT] [FONT=Verdana, sans-serif]As stated above once you have a surveyor involved you can instruct them to value the freehold as it stands and separately a lease extension price for each flat then see if everyone agrees.[/FONT]

deFoix

A flat management company will have to be formed regardless (assuming more than 4 leaseholders). After agreeing a price with the current Freeholder I would split costs based on lenght of lease and ground rent for each flat using a discounted cashflow analysis. Basically summing up all future cashflows to the Freeholder for each flat.

It would get more complicated if a number of leasesholders didn't want to be involved in the purchase. You'd have to pool these seperately and divide equally.

charoniv

When I last did this the costs per flat varied between 10's of thousands and a few hundred - depending on length of lease and the terms.

The first thing to do is to find out how much it will cost to buy the freehold. Then you will know how much you have to find.
Based on that you might get an idea of how many flats wish to be part of the new owning company - the others will have to find the money between them.
Those that aren't shareholders in this company will need to pay in future and you will need to decide on those costs and what happens to that money.
You might end up with two types of shares in the company.