Should I buy the freehold?

sand_hun

I live in a large Victorian house split into two flats.

The owner of the land wishes to sell her freehold interest in the property for a value of 10k.

The current ground rent is £200 per year (per flat).

The remaining lease is 83 years.

Bit confused about what to do in this situation. Should myself and the owner of the other flat look to buy the freehold between us or should we allow it to go to the auction and save ourselves the bother of forking out a combined 10k?

Thanks in advance.

AdrianC

83 year lease? So borderline unmortgageably short.

Buy. You'll need to extend your lease anyway in the near future - might as well be on both ends to do it.

bouicca21

I’d buy mine like a shot, partly for the control but also because there are some rapacious buyers out there

SmashedAvacado

Is the proposal that you pay £10k to buy the whole freehold - or that you buy 50% of the freehold for £10k. as there is another flat in the block it would be good to get an understanding from the other flat owner whether they want "in". But even if they dont, if you can get the whole freehold for £10k and assuming the other flat also has 83 years on the lease, you may be able to get your £10k or most of it back when the other flat comes to you to extend their lease.

sand_hun

SmashedAvacado wrote: »

Is the proposal that you pay £10k to buy the whole freehold - or that you buy 50% of the freehold for £10k. as there is another flat in the block it would be good to get an understanding from the other flat owner whether they want "in". But even if they dont, if you can get the whole freehold for £10k and assuming the other flat also has 83 years on the lease, you may be able to get your £10k or most of it back when the other flat comes to you to extend their lease.

Hi, this is what the surveyor representing the freeholder has said to me:

You may wish to acquire the interest personally or you may opt to buy in conjunction with your neighbour by setting up a limited company and splitting the cost.

To further complicate matters while both flats currently pay an equal amount of ground rent (i.e. £200) the two flats are not the same size, ours is bigger and includes off road parking therefore we may have to negotiate how the 10k is split, e.g. 60:40, 70:30 etc

eddddy

sand_hun wrote: »

To further complicate matters while both flats currently pay an equal amount of ground rent (i.e. £200) the two flats are not the same size, ours is bigger and includes off road parking therefore we may have to negotiate how the 10k is split, e.g. 60:40, 70:30 etc

If you both pay £200 ground rent and you both have 83 year leases, it's probably sensible if you each buy/own 50% of the freehold at £5k each.

If one person owns, say, 70% and the other 30% - arguably the 70% owner would overrule the 30% owner on everything.


It would be very, very sensible to get both leases extended to 999 years at the same time as purchasing (plus any other lease variations that you and your neighbour want).

Ask a solicitor for quotes for dealing with setting up a company, the freehold purchase, and the lease extensions/variations - so you know what to budget for.

G_M

No question - Buy it. Either in your sole name or with your neighbour 50/50.

princeofpounds

Yes, buy it. You get a 4% return (200x2 / 10000) on avoiding the ground rent, which is great, particularly when you consider it's an after-tax liability. On top of that, you will avoid the costs of lease extension - I have no way of calculating what that is, but it's going to be sizeable. To be frank, 10k sounds like it could be undervalued.

Personally I would prefer to buy it solo, if possible. That gives you a lot of control over how the exterior of the property is managed. The one problem with 50/50 freehold arrangements is that you don't have a tiebreaker vote, so if you end up with an idiot of a neighbour, it can be difficult to resolve any disagreements.

But it's probably more important to avoid a bidding war and, if you get on fine with your neighbour, then 50/50 isn't a bad way to go at all.

To further complicate matters while both flats currently pay an equal amount of ground rent (i.e. £200) the two flats are not the same size, ours is bigger and includes off road parking therefore we may have to negotiate how the 10k is split, e.g. 60:40, 70:30 etc

None of this matters. Whilst ground rent is sometimes apportioned based on property size, there is no direct link. It can be a totally arbitrary number. At the start of of the arrangement, if the freeholder charges a high ground rent, they make the leasehold they are selling less valuable.

Service charges, as opposed to ground rent tend to be less arbitrary, but again there is nothing prescribed in terms of how they are calculated - per property, floor area, number of rooms; all (and more) are possible in theory.

Tom99

I think the freeholder needs to offer the right of 1st refusal to both tenants before going straight to a deal with only one of them.

zagubov

If offered, take it!

30ismorethan171991haha

is it for the entire house? or just for a share of the house?