share of freehold - worth it?

JeffMason

Thanks all!
I get that the lease is shared etc. But I still don't quite understand why there is a number on the length of the lease. Surely, if you all own it jointly you could all just own your percentage forever / as long as you own the property. What is the point of having the length of years on it in this situation? 

eddddy

JeffMason said:

So you are in a good position. Share of freehold and 999 years lease. I'd heard that long leases like that are only with ex council properties, and that often having the council as the freeholder is not a good idea.

If the leaseholders have bought the freehold of the building, it's generally good practice to extend everyone's lease to 999 years, with zero ground rent.

If that hasn't happened, it might be because:

• the leaseholders were poorly advised
• the leaseholders didn't want to spend the extra legal fees for lease variations (a short-sighted, false economy)
• not all leaseholders participated in the freehold purchase
• the leaseholders couldn't agree on terms (e.g. how much each leaseholder should pay) for the freehold purchase / lease extensions

lindze

JeffMason said:

Thanks all!
I get that the lease is shared etc. But I still don't quite understand why there is a number on the length of the lease. Surely, if you all own it jointly you could all just own your percentage forever / as long as you own the property. What is the point of having the length of years on it in this situation? 

The lease is not shared. You are leasing your flat from the freeholder for a period of time which gives you a right to live there. Once the lease runs out the flat ownership would return to the freeholder, as your right to lease it has run out. This is why when a lease is short it costs a small fortune to extend it. 

As mentioned in my last post, think of this as a chest of drawers....your flat/lease and the freehold are two different things. 

kuratowski

JeffMason said:
What is the point of having the length of years on it in this situation? 

A lease has to have a length, otherwise it wouldn't be a lease.  And the lease itself is necessary because it is the legal contract which puts obligations on the flat owners e.g., to pay their share of the maintenance, and not to cause damage to the structure of the building, etc.  These obligations relied on by lenders when advancing a mortgage.

Obviously in the case that the lease is for hundreds of years, it's practically the same as forever, but having a long lease keeps these obligations intact and makes them enforceable.

JeffMason

lindze said:

JeffMason said:

Thanks all!
I get that the lease is shared etc. But I still don't quite understand why there is a number on the length of the lease. Surely, if you all own it jointly you could all just own your percentage forever / as long as you own the property. What is the point of having the length of years on it in this situation? 

The lease is not shared. You are leasing your flat from the freeholder for a period of time which gives you a right to live there. Once the lease runs out the flat ownership would return to the freeholder, as your right to lease it has run out. This is why when a lease is short it costs a small fortune to extend it. 

As mentioned in my last post, think of this as a chest of drawers....your flat/lease and the freehold are two different things. 

Wait. I'm confused again. But in this case, if I am one of the freeholders then I am leasing the flat from myself and the other freeholders. So it doesn't really need to have a length, does it? 

JeffMason

kuratowski said:

JeffMason said:
What is the point of having the length of years on it in this situation? 

A lease has to have a length, otherwise it wouldn't be a lease.  And the lease itself is necessary because it is the legal contract which puts obligations on the flat owners e.g., to pay their share of the maintenance, and not to cause damage to the structure of the building, etc.  These obligations relied on by lenders when advancing a mortgage.

Obviously in the case that the lease is for hundreds of years, it's practically the same as forever, but having a long lease keeps these obligations intact and makes them enforceable.

Ah, so in a share of freehold situation, the lease is there to manage the freeholders, to make sure they do their fair share etc. And in order for it to be a lease it needs to have a number.
I guess I was thinking that a share of freehold property would have a third type of contract that sit somewhere between freehold and leasehold, when instead of having it's own thing, it just takes bits of those two and makes them work.

zagubov

The advantages of owning a share of freehold include finding it easier to make changes to the flat without the freeholder being tricky. Also stops the freehold being sold on to a company who will try to gouge every penny out of the situation. And will make it harder for the freeholder to surprise you by building an extra floor on top.

lindze

JeffMason said:

Wait. I'm confused again. But in this case, if I am one of the freeholders then I am leasing the flat from myself and the other freeholders. So it doesn't really need to have a length, does it? 

As someone mentioned earlier,a lease has to have an end date to be a lease.

As freeholders we can make things better for ourselves eg when we bought ours we extended the leases to 999 years so the end date is not a concern for us. But we all had to agree to do allow it. 

 
https://www.land-registry-documents.co.uk/the-basics-of-a-lease/

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/leasehold-v-freehold-whats-the-difference/

JeffMason

Thanks all. Amazingly helpful. Much appreciated!

robatwork

Just to add it's good and bad.  Can you establish if any of the leaseholders (and joint freeholders) are renting their flat out?  Just from experience those people can be more difficult to deal with, more difficult to get to agree anything, and more difficult to extract money from. If it's 1 flat in 20 that's one thing. If it's 3 out of 4 I would be concerned.

Do you have a lift, for example?  Great to have but notoriously expensive to maintain and replace.