Leasehold property with around 40 years left on EXTENDED 50 year lease-looking for advice

topoftherock

Hi guys, I am wondering what the best option(s) would be in regard to my situation. Ideally, we would like to buy the freehold (it’s a terraced house). Here is a brief summary of events- In 2010, there was a 50 year extension to the lease and the owner (that is a big concern and owned/owns many properties/land locally) wanted around £22,000 for the freehold (After the house was valued by a surveyor). In 2014, the owner said that we would need to pay their surveyor fees before they could even give us a figure for buying the freehold!. We worked this figure out to be around £1,000, so we refused (as it was only valued 4 years previously). After this, I sought free advice from the citizens advice bureau. With the help of the citizens advice bureau, they estimated the value of the freehold to be around £27,000. So I know that the 2018 asking price is going to be higher. So now I’m wondering what is the best move? Do we write to the proprietor (their solicitors/representatives ) and offer a low price e.g £15,000? Would there be any possible negative consequences by doing this? Would initiating the first move make it less likely to acquire the freehold at a fair price? Is it best to wait until they contact us? Do we look to extend the lease again? Is it actually possible to have another lease due to the extension we already have? Has anyone successfully bought the freehold without being ripped off/at a fair price? Any help would be greatly appreciated! Kind regards

Hoploz

I'm not clear on the length of the lease... Was it extended in 2010? If so how long is left ... And is there a benefit to buying the freehold?

Cakeguts

You can offer the freeholder whatever price you like and they can always refuse it. There is a legal method for working out how much you will be asked to pay for the freehold. This is probably how CAB managed to work out that it would have cost £27,000 then. The landlord can't sell it to you for just any price he likes. If you don't agree you can challenge it but you are unlikely to be able to buy it for £15,000 now if the value was around £27,000 in 2014.



The fair price is worked out based on how much the house would be worth freehold as compared to leasehold. It is done like this so that a tenant pays the market price for the freehold. The intention is that the landlord gets a fair price for his property and the tenant is not ripped off.

topoftherock

Hoploz wrote: »

I'm not clear on the length of the lease... Was it extended in 2010? If so how long is left ... And is there a benefit to buying the freehold?

Hi Hoploz, thanks for your reply. Yes, we had a 50 year extension in 2010, so it will end in 2060. Well, we would like to buy the freehold as it has great potential. However, at the moment, it’s probably only worth £40,000 to £50,000 (the average house price in the area is around £70,000-£80,000 but our house needs lots of renovation) so I found it crazy how they can ask for such a high amount for the freehold. Although they stated in 2010 that they wanted £22,000 for the freehold, can that figure be justified? Kind regards

casper_g

How long was left on the lease when you extended it by 50 years in 2010?

Cakeguts

topoftherock wrote: »

Hi Hoploz, thanks for your reply. Yes, we had a 50 year extension in 2010, so it will end in 2060. Well, we would like to buy the freehold as it has great potential. However, at the moment, it’s probably only worth £40,000 to £50,000 (the average house price in the area is around £70,000-£80,000 but our house needs lots of renovation) so I found it crazy how they can ask for such a high amount for the freehold. Although they stated in 2010 that they wanted £22,000 for the freehold, can that figure be justified? Kind regards

If you buy the freehold you won't be in a position to make a profit. That is the whole point of the legal way of working out how much you pay for the freehold. The shorter the lease the more the freehold costs because when your lease runs out the landlord can sell the house for the full amount. The price you pay for the freehold has also to be fair to the landlord who is losing the opportunity to wait until the lease ends and get the full value of the house.

eddddy

topoftherock wrote: »

Do we write to the proprietor (their solicitors/representatives ) and offer a low price e.g £15,000? Would there be any possible negative consequences by doing this? Would initiating the first move make it less likely to acquire the freehold at a fair price?

There is no real harm in contacting the freeholder to make an offer for the freehold.

For this kind of informal approach, there are no rules.
(e.g. You could offer £5k and the freeholder could ask for £100k. If you can't find a price that you both agree on, the transaction won't happen.)


BUT... there is an alternative route that you can probably follow. You probably have the legal right to compulsorily purchase the freehold.

If you go down the 'compulsory purchase' route, there are legal formulas for calculating what you have to pay.

Here's some info about that route: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

topoftherock

Cakeguts wrote: »

You can offer the freeholder whatever price you like and they can always refuse it. There is a legal method for working out how much you will be asked to pay for the freehold. This is probably how CAB managed to work out that it would have cost £27,000 then. The landlord can't sell it to you for just any price he likes. If you don't agree you can challenge it but you are unlikely to be able to buy it for £15,000 now if the value was around £27,000 in 2014.



The fair price is worked out based on how much the house would be worth freehold as compared to leasehold. It is done like this so that a tenant pays the market price for the freehold. The intention is that the landlord gets a fair price for his property and the tenant is ripped off.

Hi Cakeguts, many thanks for your informative reply. In regard to the figure back in 2014 (£27,000), do you think they took the £22,000 figure into account? (from 2010). I definitely told them of this figure at the time. In regard to the house, my father owns it but he is in his 70s and really wants to buy the freehold before he passes on. The problem is, he is very “old school” and is just hoping that they will send a letter with an offer (which I think is very wishful thinking). He also doesn’t like to get out of his comfort zone and I’m afraid he won’t get the opportunity. I’m conscious that the figure is slowly increasing every year. How would you go about it? Kind regards.

Cakeguts

topoftherock wrote: »

Hi Cakeguts, many thanks for your informative reply. In regard to the figure back in 2014 (£27,000), do you think they took the £22,000 figure into account? (from 2010). I definitely told them of this figure at the time. In regard to the house, my father owns it but he is in his 70s and really wants to buy the freehold before he passes on. The problem is, he is very “old school” and is just hoping that they will send a letter with an offer (which I think is very wishful thinking). He also doesn’t like to get out of his comfort zone and I’m afraid he won’t get the opportunity. I’m conscious that the figure is slowly increasing every year. How would you go about it? Kind regards.

https://www.lease-advice.org/faq/i-own-a-leasehold-house-how-do-i-buy-the-freehold/



This government site tells you how to do it.



Depending on how old your father is will depend on whether it is worth it to him or not. If he is in his 70s now and there is 40 years left on the lease it may not be worth his while to buy the freehold unless you think he will still be living there at 110 years old.



Buying the freehold is likely to cost several thousand pounds. If he has to have care he will have to sell the house to pay for it unless he can pay for it out of savings. He will have to pay for the freehold with cash from savings unless he is young enough to get a mortgage which is sounds as if he probably isn't.

topoftherock

casper_g wrote: »

How long was left on the lease when you extended it by 50 years in 2010?

Hi Casper, many thanks for your question. Actually, there wasn’t any years left, so we were lucky to get the extension. Our solicitor didn’t even tell us about the option of an extension! It was only by chance that we found out! Thank god!

moneyistooshorttomention

I have an idea that I've only read VERY recently (ie in the last few weeks) somewhere about some law about to come in re the price that can be charged for freeholds.

That price was a very reasonable one imo. There were a couple of different options to establish what the price would be and, from vague memory, there were two options and one of them was a maximum of a certain number of years worth of service charges (10 years??).

Your fathers house won't be one of these modern "freehold" type properties - but I doubt this coming law would only refer to them.

Couldnt swear to it - but worth checking out - as I think there's a good chance more "traditional" type freehold properties might just be covered (ie as well as the modern "sell a house without a typical 'its freehold - end of' scam that's currently going on, but the law will soon stop this lark).