Buying share of freehold

JohnnyKabuki

Hi,

Our freeholder has offered us the freehold to purchase for £5K. We live in a split victorian conversion with another flat on top of us. We talked to them and agreed we'd want to buy this a share of freehold as individual owners. It now looks like they have 93 years left on their lease. We have 153. They also have ground rent to pay until 2079, we don't. Our joint solicitor came back with a breakdown of the fees in regards to the number years etc and worked out that we should pay £500 and them £4,500. Obviously this works for us as we bought our flat for the price we did two years ago knowing how many years were left and how there was no groud rent. But now our neighbours feel like their share is too much and sort of insist going back on the fact we agreed to go half half and is not happy with the calculation as they were keen on selling in 2/3 years tops and hoped to make a profit on their sale (we wouln't really as we have so many years) What is the formula already used? Their lease extension is £5,000 in itself if they had to extend now regardless of buying the freehold and the ground rent is £7,125 to pay until 2079. Are we better off buying the freehold all together instead of letting them push us into go 50/50 on the premium and allowing them to get a very good deal in term of the extension and now owing part of the freehold but owing us half ground rent? We would be able to get the full payment of any lease extension, full ground rent and sell half of the freehold and recoup more than £5k if we bought the full thing, right? Sorry if this is really long:money:

eddddy

Everything you've said sounds reasonable - assuming your solicitor has done the calculations correctly.

Would the freeholder be prepared to sell the freehold to just you for £5k? If so, that's certainly an option.

I guess you need to consider:

• The other flat probably wouldn't need to extend their lease within the next 10 years, so you might have to wait a long time to get a return.

• You'd take on the responsibilities of a freeholder, and if your neighbour doesn't cooperate voluntarily, you'd have to abide by a lot of legislation (e.g. If the roof needs repairing.)

JohnnyKabuki

Thanks for your reply, yes we'd obviously also want to keep in good terms with our neighbours in terms of potential repairs and the current deal is quite good, 50/50 on repairs on the roof for them to take responsibility or ground parts for us. The freeholder would sell to us only if the neighbours pulled out as they gave the choice to go full owner or share..
But if we get stuck in a 50/50 arrangement where we effectively foot the difference for them to have equal lease term, could things get messy in the future in terms of receiving a half share of ground rent and re-calculate the half of the lease hold extension? Our main reason to go for it is that we wanted to be in control of the thing, and avoid a situation like we had in the past where we struggle to hear back from our freeholder when we last sold and this made things more stressful than needed. We're also hoping that the freehold would turn into a selling argument to help sell faster, even if at £153 years on our lease it probably would not add so much value, but it seems it would add quite a lot on theirs immediately by going from 93 year to a share of free hold and a lease of 189. Just worried they might leave and we're left with a situation that would involved additional legal costs in the future, or is this something they would face during the sale process.
Struggling to hear back from the solicitor to get confirmation on the calculation method. Does it add up the extension £5K + 7K ground rent on their side + our £500 extension, work out the % of each flat from that total and apply that % to the premium cost for the freehold (£5,000). I appreciate this might not be possible to work out the exact amount without taking other things into consideration but just want to check my understanding of the calculation is correct.

eddddy

It's a bit difficult to follow and address all your questions.

Maybe consider these 2 options, which both seem reasonable:

Option 1

• You each pay £2.5k for equal shares of the freehold.

• If your neighbour wants to extend their lease later, they have to pay you 50% of the 'normal' cost - so maybe 50% of £5k = £2.5k

Option 2

• You pay £500 and your neighbour pays £4.5k for equal shares of the freehold

• You both extend your leases to 999 years, with no money changing hands

Option 2 tends to demonstrate that a £500 / £4,500 split is fair. In fact it makes your neighbour £500 better off than doing option 1.


In terms of things getting "messy" - yes, if you can't both agree on stuff, things will get very messy.

And if you have to resort to solicitors, valuers and tribunals etc, it will get very expensive.

JohnnyKabuki

Haha yes sorry this has been keeping slightly awake at night and my brain might have gone into overload.

Appreciate you taking the time. You make a good point about them being better off by £500.

The valuers and surveyor aspect is what I want to avoid and it looks like going 50/50 now and leaving the leashold extension at a later date at which we'd have to evaluate the cost again seems like it'd raise more costs and paperwork.

Tom99

JohnnyKabuki said:

Haha yes sorry this has been keeping slightly awake at night and my brain might have gone into overload.
Appreciate you taking the time. You make a good point about them being better off by £500.
The valuers and surveyor aspect is what I want to avoid and it looks like going 50/50 now and leaving the leasehold extension at a later date at which we'd have to evaluate the cost again seems like it'd raise more costs and paperwork.

But the other leaseholder would have to pay both their own and the freeholders costs so you, as a joint freeholder would not incur any cost when the other leaseholder wants to extend their lease. You just sit back and collect 50% of the premium they pay.