Flat owner selling 999year lease but not "SoF"

Badegg

accidentally posted this initially in other sub so posting here as well.

Just wanted some advice - there's a 4 floor purpose built block were looking at. Previously 1 freehold owner but then he sold the freehold and it's now owned by a management company in which the 4 flat owners have a 25% stake / directorship. One of the owners wants to sell a flat with 999 year lease on it but wants to keep the company ownership/directorship.

Currently service charge very reasonable at around 600 vs some 1500-1700 I've seen for equally priced leasehold flats with 100-120 yr leases. Ground rent is 90 vs 200-300 I've seen for equally priced leasehold flats with 100-120 yr leases

Should I push for the sale to include the share of ownership in management company? If so how much extra should that cost for a flat under 500k?

Is there any reason why the flat owner would want to keep the % ownership in management company since presumably it will be non profit and the flat has long lease. I doubt the other SoF would want to pay extra GR / SC themselves so would keep it at current reasonable levels...

The property was reduced 10-15% and the EA says the owner wants to get a few K over the "£xxx offers & over" price...but tbh whilst it is competitively priced if we calculate the value of a £100 annuity for e.g. 50 years it will still only cost several k (which is around / half of "amount over the asking price" that the seller wants depending how you value 100£ annuity).

i am waiting to hear the reply from EA if the owner would consider including it in sale.

Could it be possible owners hoping for a scenario where e.g in 20-25 years when London will have e.g. 50m people or something and some development company would offer 20m or so for the freehold to build a skyscrapper and owner can cash in on that?

Many thanks!

kingstreet

I've "bigged-up" everyone over here on HBR&S when this was posted on M&E so you'd better not let me down, or else...!

G_M

Badegg wrote: »

.... there's a 4 floor purpose built block were looking at. Previously 1 freehold owner but then he sold the freehold and it's now owned by a management company in which the 4 flat owners have a 25% stake / directorship.
What do the Company's Articles of Association say? Have you checked?

One of the owners wants to sell a flat with 999 year lease on it but wants to keep the company ownership/directorship.
1) do you mean he wants to create a new lease? Wht is the length of the current lease on the flat? He can't create a new lease without the Freeholder (ie the 4 Directors) agreeing.

2) it is likely (you need to check) that the Company articles don't allow anyone to be a Director unless they own a lease.

Currently service charge very reasonable at around 600 vs some 1500-1700 I've seen for equally priced leasehold flats with 100-120 yr leases. Ground rent is 90 vs 200-300 I've seen for equally priced leasehold flats with 100-120 yr leases
How is this relevant to your question?
The service charges are whatever the leases say.

Should I push for the sale to include the share of ownership in management company? If so how much extra should that cost for a flat under 500k?
read the Articles.

Is there any reason why the flat owner would want to keep the % ownership in management company since presumably it will be non profit and the flat has long lease. I doubt the other SoF would want to pay extra GR / SC themselves so would keep it at current reasonable levels...
see above

The property was reduced 10-15%
from what?
So what?
It s worth what a buyer will agree to pay - no more.

and the EA says the owner wants to get a few K over the "£xxx offers & over" price...
owner may want 50% over the asking price, but if no one will pay that he's out of luck!

but tbh whilst it is competitively priced if we calculate the value of a £100 annuity for e.g. 50 years it will still only cost several k (which is around / half of "amount over the asking price" that the seller wants depending how you value 100£ annuity).
No idea of the relevance of an annuity to this.

i am waiting to hear the reply from EA if the owner would consider including it in sale.
Are you the potential buyer then?

Could it be possible owners hoping for a scenario where e.g in 20-25 years when London will have e.g. 50m people or something and some development company would offer 20m or so for the freehold to build a skyscrapper and owner can cash in on that?

Who knows what is in the mind of another person?


Having read the full post now:

1) I assume you are thinking of buying
2) don't even consider this unless the Share of Freehold is included
3) don't pay more than you think it is worth - tto you. What the seller wants is irrelevant. what matters is what you want.

Badegg

G_M wrote: »

Who knows what is in the mind of another person?


Having read the full post now:

1) I assume you are thinking of buying
2) don't even consider this unless the Share of Freehold is included
3) don't pay more than you think it is worth - tto you. What the seller wants is irrelevant. what matters is what you want.

thank you for your reply. The seller owns a 999 year lease along with a % of management company where they are a 25% director.

the GR / SC i mentioned because someone asked about it in other thread and to indicate that there doesnt seem to be much obvious reason for them to want to keep the share of management company that owns the freehold.

sorry for stupid qs but presumably id only have access to the Company's articles if im considering making an offer / having lawyer get involved? if they dont tell me the name could i find them myself online? i havent even visited the property, was about to arrange a viewing when i wanted to confirm the SoF issue and then asked for clarification before proceeding.

the annuity bit i mentioned from PoV of how much extra to offer. as i mentioned imo the flat is very competitively priced imo and if it included the SoF id probably snap it up...if they ask like 15-20k extra for the management share its crazy...but i guess an extra 1k probably wouldnt want to lose the deal over it.

yes potential buyer from PoV that its a property that has most caught my eye in the past several months of looking in terms of specs / location etc.

thanks for reply. as expected this SoF should absolutely be included but any guesses as to why theyd might want it?

G_M

Is this a brand new flat? If not (and it sounds like not ), it was probably originally a 999 year lease. It will be less now (though insignificantly eg 989 if the building is 10 years old).

Not sure if you can get company articles. try here.

I strongly suspect the 25%freehold share will be tied to the flat, so unlikely he can keep it. But no guarantee.

D'd simply make your offer, in writing, for the lease and freehold share.

Vampyr

An annual annuity of £90 at 3% is worth £3k. Have no idea why they'd want to hold out for such a puny amount...seems like it's more trouble than it's worth!

Badegg wrote: »

Could it be possible owners hoping for a scenario where e.g in 20-25 years when London will have e.g. 50m people or something and some development company would offer 20m or so for the freehold to build a skyscrapper and owner can cash in on that?

Maybe, but they have to buy out your lease first and the lease is worth more than the freehold.

eddddy

Badegg wrote: »

One of the owners wants to sell a flat with 999 year lease on it but wants to keep the company ownership/directorship.

Out of interest, how do you know this? Did the EA specifically say that it's just the lease being sold, and not the share of freehold?

If it is the case, I guess the reasons might include:

• The seller wants to sell their freehold share to another leaseholder (perhaps because that leaseholder hopes to eventually own 100% of the freehold).

• There is some development potential which makes the freehold valuable - e.g. loft conversion, extra storey, extension, new development in the garden etc.

• The seller wants to make the leasehold seem cheap, by selling you the share of freehold separately for an extra £5k or so

Badegg

G_M wrote: »

Is this a brand new flat? If not (and it sounds like not ), it was probably originally a 999 year lease. It will be less now (though insignificantly eg 989 if the building is 10 years old).

Not sure if you can get company articles. try here.

I strongly suspect the 25%freehold share will be tied to the flat, so unlikely he can keep it. But no guarantee.

D'd simply make your offer, in writing, for the lease and freehold share.

nope, not brand new. definitely a few decades old. from the convo it seems the 999 year lease is quite recent since until recently freehold was owned by 1 person (developer?)

would there not be a potential issue where the seller could accept then some way into the process suddenly demand an extra 5-10k and then deal falls apart? thankfully were chain free so it wouldnt be much of an issue except lost fees but again, wouldnt be the best scenario

Vampyr wrote: »

An annual annuity of £90 at 3% is worth £3k. Presumably he only gets 25% because he only owns a 25% share of the company. So it's only worth £750. Have no idea why they'd want to hold out for such a puny amount...seems like it's more trouble than it's worth!

Maybe, but they have to buy out your lease first and the lease is worth more than the freehold.

£90 is just for the flat, so presumably the 4 together generate 360 so the 25% share would be 90. so technically i guess annuity would be worth 3k...guess qs is whether thats an amount worth fighting for? just seems like the easier thing to have done would be to make price 5k higher and not bother with this. maybe they are just slightly misinformed and think theyre being smart and keeping extra value? more worrying would be the fact if they were planning to somehow collude in future with other flat owners. in fact i dont know if this is infact a building where all flats maybe still are owned by same person who has given out 4x999 leases but actually keeps all the freehold to himself. just assuming that its different flat owners each with a SoF ivia management company ownership...

Badegg

eddddy wrote: »

Out of interest, how do you know this? Did the EA specifically say that it's just the lease being sold, and not the share of freehold?

If it is the case, I guess the reasons might include:

• The seller wants to sell their freehold share to another leaseholder (perhaps because that leaseholder hopes to eventually own 100% of the freehold).

• There is some development potential which makes the freehold valuable - e.g. loft conversion, extra storey, extension, new development in the garden etc.

• The seller wants to make the leasehold seem cheap, by selling you the share of freehold separately for an extra £5k or so

yes EA specifically mentioned that they didnt want to sell the SoF rather than that they were selling it separately. I've asked them to clarify and get back to me.

i dont think theres potential for loft expansion as it already seems to be full 4 floors. the only option i guess is if they literally build a 5th floor which would probably make life hell for top floor owner? im not sure as to how regulations etc work in this scenario. for what its worth it would be only 5 floor building in surrounding area....doesnt seem an easy way to do it either so doubt it.

garden isnt mentioned as a communal area but either way from google satellite it seems small and i doubt theyd be able to get anything much more than a garage maybe there? its a bit weird shaped either way.

from my understanding the sole freeholder already sold to the 4 flats and they divied it up between the 4 of them. i guess technically possible that they might have an offer from another flat owner who wants to get to 50%??

in regards to final point - their listing is "OIEO"...so presumably they could have just made it 5k higher from the start. its already been reduced previously.

Vampyr

Badegg wrote: »

£90 is just for the flat, so presumably the 4 together generate 360 so the 25% share would be 90. so technically i guess annuity would be worth 3k...guess qs is whether thats an amount worth fighting for? just seems like the easier thing to have done would be to make price 5k higher and not bother with this. maybe they are just slightly misinformed and think theyre being smart and keeping extra value? more worrying would be the fact if they were planning to somehow collude in future with other flat owners. in fact i dont know if this is infact a building where all flats maybe still are owned by same person who has given out 4x999 leases but actually keeps all the freehold to himself. just assuming that its different flat owners each with a SoF ivia management company ownership...

Then offer £5k for the freehold share. If they say no, then apply for statutory lease extension after a couple of years. That's an annuity calculation done at around 4% = £2k. The freeholder can then enjoy his £1 peppercorn rate for the next thousand years and cry over his extra £3k that he could have got from you.

Badegg

Vampyr wrote: »

Then offer £5k for the freehold share. If they say no, then apply for statutory lease extension after a couple of years. That's an annuity calculation done at around 4% = £2k. The freeholder can then enjoy his £1 peppercorn rate for the next thousand years and cry over his extra £3k that he could have got from you.

sorry if im being stupid but are you saying that this will mean that the ground rent will change from 90 to 1? the flat already has a 999 year lease.