Buying share of freehold on completion?

eddddy

leypt1 said:

eddddy said:

leypt1 said:

What do you think?

You need to explain what you want to buy. (There is no such thing as buying a "share of freehold" in the way you suggest.)

• Perhaps you mean you want to buy the freehold of the building.
• Or perhaps you mean you want to club together with the other leaseholders to jointly buy the freehold of the building.

Thanks very much for your responses! It's the latter, which means the neighbours are also a wildcard.

We haven't asked the HA, the lease is currently 87 years, and we would be looking to make this a part of the conveyancing process. From these responses we are leaning towards walking away, but out of interest what makes it particularly difficult to buy during conveyancing?

OK - so when a group of leaseholders get together to buy the freehold, it's called "collective enfranchisement".
You can read about it here: https://www.lease-advice.org/advice-guide/ce-getting-started/

It's a whole different area of law from conveyancing. It's unlikely that your conveyancing solicitor will be experienced in it - you would generally need a different specialist solicitor. Once your neighbours agree, it might take 6 months+ to get done.

As I mentioned previously, the housing association will probably know about the development potential of the loft (i.e. the potential to add another floor to your flat), so you will probably have to pay a premium to reflect that development potential.

greatcrested

It is highly unlikely that the HA would agree to sell the freehold.

If they did they would probably offer it to the leaseholders, so yes, you would share ownership.

You would then need the consent of the other joint owners to get the loft demised to your flat's lease.

This idea is a non-starter.

AskAsk

leypt1 said:

eddddy said:

leypt1 said:

What do you think?

You need to explain what you want to buy. (There is no such thing as buying a "share of freehold" in the way you suggest.)

• Perhaps you mean you want to buy the freehold of the building.
• Or perhaps you mean you want to club together with the other leaseholders to jointly buy the freehold of the building.

Thanks very much for your responses! It's the latter, which means the neighbours are also a wildcard.

We haven't asked the HA, the lease is currently 87 years, and we would be looking to make this a part of the conveyancing process. From these responses we are leaning towards walking away, but out of interest what makes it particularly difficult to buy during conveyancing?

as the HA is the freeholder, you should approach them and ask the question.  buying a share of the freehold can take time to do, so trying to do that as part of the conveyancing process will delay the property purchase.  in your case you would have to get everyone in the block to agree to buy the freehold, get the HA to agree to sell it for the block, give you a valuation and then the neighbours have to stump up enough money to buy it.  doesn't always work.

here is info on the lease length

"Should I avoid buying a property on a short leasehold?

Leases of less than 90 years can start to be problematic for leaseholders, and should be approached warily. Certainly, any lease of less than 80 years can start to significantly affect the value of the house. If you have a short lease, the property can decline in value even if property prices in your area are generally rising. This means that fewer people will want to buy it when you resell; it also means that mortgage companies might be reluctant to lend on it."

eddddy

greatcrested said:

It is highly unlikely that the HA would agree to sell the freehold.

If they did they would probably offer it to the leaseholders, so yes, you would share ownership.

You would then need the consent of the other joint owners to get the loft demised to your flat's lease.

This idea is a non-starter.

It would probably be possible for the leaseholders to compulsorily purchase the freehold using Collective Enfranchisement.

The valuation would take account of the development potential of the loft.
For example: it might be £30k for the freehold plus £80k for the development potential of the loft = £110k in total.

So if there are 3 flats, maybe the agreement would be that  the other 2 flats put £10k in the pot and the OP puts £90k in the pot for the purchase price (and the OP gets the loft space).

davidmcn

leypt1 said:

out of interest what makes it particularly difficult to buy during conveyancing?

Because it's already complicated enough to coordinate the people involved in a chain, without then trying to tie it into a slightly different transaction involving at least two additional parties (who may not even be interested in the first place).

NameUnavailable

Some incorrect info here.

As said you can't just buy a share of a freehold. You can try collective enfrancisement if the property and other leasholders meets the criteria, but it's likely that only some will be interested and then only some of them will be able to afford it.

You can do a deal directly with the freeholder or you can get a property tribunal to determine the value of the freehold. You will also need to pay legal costs usually for both sides.

The other option is to extend the lease - you will need to do this if you buy the flat because the shorter it gets the harder it will be to sell on (and it gets more expensive as each year passes). You can't do this until you've lived in the flat for 2 years unless you can negotiate terms with the freeholder directly (and it means you'll probably be paying more than you really have to, as they're doing you a favour as it were).

The loft space is a whole other issue. Does the existing lease cover use of the loft? Obvioulsy to change it into living accommodation would require consent of the freeholder for which they will want to charge you. How much is anyone's guess.

Be aware that the Govt. are easing planning restrictions to encourage more new homes to be built. A lot of homes are likely to be built by adding more floors to existing blocks of flats. Your freeholder may already be drawing up plans to build another load of flats above you!

eddddy

NameUnavailable said:

You can't do this until you've lived in the flat for 2 years unless you can negotiate terms with the freeholder directly 

(To be pedantic - you mean 'owned' rather than 'lived in'. e.g. it applies if you rent out the flat as well.)

And just to clarify, assuming the current owners have owned the flat for at least 2 years - you can make it a condition of the contract that they start the statutory lease extension process before completion. 

That way the process starts immediately, you don't have to wait until you've owned the flat for 2 years.