Anyone with experiencing of buying the freehold (house) while on an extended 50-year lease?

topoftherock

Hi guys, has anyone had experience of buying the freehold (for a house) while on an extended 50-year lease? If so, how much did it cost? How much did it cost in relation to the value of the property? What was your annual ground rent at the time? How much were the legal fees? Any help would be greatly appreciated. Kind regards

anselld

Not sure what you mean by "extended 50 year lease". Only 50 years left to run or extended further?

Anyway here is some information on the valuation process...
https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

G_M

By how much has the lease been extended?

topoftherock

Hi, thanks for your replies. the original lease was from 1911 to 2010 at £2 per year, and then it was extended for 50 years from 2010 to 2060 at £1,000 per annum. I recently paid £3 for the title register for the property, and it shows that the freeholder’s surveyor/valuer valued the house at £80,000 around Late 2010, and that was definitely an inflated figure (my father remembers at the time, that the freeholder specifically required that their valuer/surveyor comes to the property to value it). I mean, if it were a freehold property now, it would only sell for around £50,000 as around £30,000 work needs to be done to the property, and the properties in the street (basically all are the same size) sell for around £75,000-£80,000. In addition, during 2010, the property was in a worse state than now, and the house prices were basically the same as now. So even valuing the house at £50,000 during 2010, would you have been generous. This is why I think it’s wrong that my father is paying £1,000 per annum for a property that is essentially worth around £50,000 as a freehold. And they wanted £22,000 for the freehold in 2010, which my father could not afford. Again, I think this is totally wrong and I believe he has been ripped off/he is being ripped off. P.S it’s a 2 bedroom terraced house in the South Wales valleys.

eddddy

Here's a link to a freehold purchase calculator which may give you an idea of the cost of buying the freehold:
https://www.freeholdcalculator.com/freehold_simple.php

• £1,000 ground rent is very high. Hopefully, your father took professional advice before agreeing to that. But now it's been agreed, nothing can be done about that.
  
  The high ground rent will significantly increase the cost of the freehold.

• Regarding the poor condition of the property. I'd guess the lease says that your father is responsible for maintaining/repairing the property. So the law will consider the poor condition to be your father's fault.
  
  So when calculating the freehold purchase cost, the property will be valued as though your father had kept the property in good condition.
  
  But the lease will not have required your father to improve the property. So, for example, if the house only had an outside toilet when the lease was granted, it should be valued today as though it only had an outside toilet.

topoftherock

Hi edddy, many thanks for your post and useful information. Yes, I’ve always thought it was too high as well, but I was very young at the time and in university, so I didn’t understand it. Moreover, it is my father’s house (he is 76 years old)/father’s business and he is the type of person to just accept things without querying. To be honest, I think he was just relieved to get a 50-year extension, because he couldn’t afford to buy the freehold. But I’m starting to question the competence of his solicitor. First, because they agreed to this high annual ground rent of £1000, and second, because they didn’t even tell my father that he could have a 50-year extension (my father only found out about this by luck when passing a local estate agent). Is there a case for negligence here? My father can afford to buy it for around £15k, so do you think it’s worthwhile offering the freeholder this amount for the freehold? In regards to the outside toilet, yes, there is still an old outside toilet and old small “coal house”. However, my father told me that when the freeholder’s surveyors came to the house, they didn’t go outside so they wouldn’t have seen them I.e you can only see them if you go down to the garden as they are under the kitchen. P.S I’ve just spoken to my father, and the £22,000 freehold asking price was actually BEFORE the 50-year lease extension in 2010. He says it was around 2008, and my grandmother was still the owner of this house at the time. So when this offer of £22,000 was made, the ground rent was still £2 per year (from 1911 to 2010) and my grandmother was still alive, therefore still in her name. (She passed away a few months after the lease extension in 2010). My father has also told me he did know/he was not informed about the 50-year lease extension option at this time. Does this make a difference?

topoftherock

Hi guys, can someone please help me out in relation to my last post? Kind regards

zagubov

topoftherock wrote: »

Hi edddy, many thanks for your post and useful information. Yes, I’ve always thought it was too high as well, but I was very young at the time and in university, so I didn’t understand it.

Moreover, it is my father’s house (he is 76 years old)/father’s business and he is the type of person to just accept things without querying.

To be honest, I think he was just relieved to get a 50-year extension, because he couldn’t afford to buy the freehold. But I’m starting to question the competence of his solicitor.

First, because they agreed to this high annual ground rent of £1000, and second, because they didn’t even tell my father that he could have a 50-year extension (my father only found out about this by luck when passing a local estate agent).

Is there a case for negligence here? My father can afford to buy it for around £15k, so do you think it’s worthwhile offering the freeholder this amount for the freehold?

In regards to the outside toilet, yes, there is still an old outside toilet and old small “coal house”. However, my father told me that when the freeholder’s surveyors came to the house, they didn’t go outside so they wouldn’t have seen them I.e you can only see them if you go down to the garden as they are under the kitchen.

P.S I’ve just spoken to my father, and the £22,000 freehold asking price was actually BEFORE the 50-year lease extension in 2010. He says it was around 2008, and my grandmother was still the owner of this house at the time.

So when this offer of £22,000 was made, the ground rent was still £2 per year (from 1911 to 2010) and my grandmother was still alive, therefore still in her name. (She passed away a few months after the lease extension in 2010).

My father has also told me he did know/he was not informed about the 50-year lease extension option at this time. Does this make a difference?

Making it more readable to encourage answers.

eddddy

It's not entirely clear what you're asking.

• I think you might be asking something like: 'Your father extended his lease sometime before 2010. His ground rent went up from £2 pa to £1000 pa. Was his solicitor negligent?'
  
  Nobody here knows the circumstances of the lease extension; or what your father said to his solicitor; or what his solicitor said to to your father - so it's impossible to say.
  
  For example, your father may have been unable to afford a 'realistic' premium, so the freeholder let your father extend the lease at a low premium but high ground rent.

• I'm not sure if you understood my comment about valuing the house in it's unimproved condition (outside toilet etc). I'll try to re-phrase it.
  
  If the lease was first granted in 1911, the house may not have been a bathroom inside the house. If that's the case, for the purposes of buying the freehold, the house should be valued today as though it has no bathroom inside the house.
  
  (So it's likely to be valued at less than other houses in the street have sold for. Because those houses were probably sold with bathrooms inside the houses.)
  
  I don't know your father's house, so I can't comment on whether it had a bathroom inside the house in 1911. But hopefully an RICS valuer who visits the house should be able to.

topoftherock

eddddy wrote: »

It's not entirely clear what you're asking.

• I think you might be asking something like: 'Your father extended his lease sometime before 2010. His ground rent went up from £2 pa to £1000 pa. Was his solicitor negligent?'
  
  Nobody here knows the circumstances of the lease extension; or what your father said to his solicitor; or what his solicitor said to to your father - so it's impossible to say.
  
  For example, your father may have been unable to afford a 'realistic' premium, so the freeholder let your father extend the lease at a low premium but high ground rent.

• I'm not sure if you understood my comment about valuing the house in it's unimproved condition (outside toilet etc). I'll try to re-phrase it.
  
  If the lease was first granted in 1911, the house may not have been a bathroom inside the house. If that's the case, for the purposes of buying the freehold, the house should be valued today as though it has no bathroom inside the house.
  
  (So it's likely to be valued at less than other houses in the street have sold for. Because those houses were probably sold with bathrooms inside the houses.)
  
  I don't know your father's house, so I can't comment on whether it had a bathroom inside the house in 1911. But hopefully an RICS valuer who visits the house should be able to.

Hi eddddy, thanks for the reply. Yes, you’re right, my father (actually he was acting on behalf of my grandmother at the time, as she was still alive and owned the house) couldn’t afford the £22,000 asking price for the freehold in 2008, but his solicitor didn’t mention about the option of having a 50-year lease extension under the leasehold act 1967 at the time (I believe they should have mentioned this, as it’s common knowledge, and they knew my father couldn’t afford the £22,000 asking price ). My father found out about the 50-year lease extension option months later in 2009 by pure luck. In regards to the house in 1916 (the lease started in 1911 and the house was built in 1916) there was no bathroom inside the house (an upstairs room was converted into the bathroom in the 1960s). Do you have any idea of the price of an RICS valuer?