In process of buying freehold

theshoefairy

Summary so far... 
Inherited house from late mother in 2013.
Freeholder notified they were selling freehold via property management company at auction, they wanted/want 50k for it (have checked auction listing for this date and it's not there). 
I had a surveyor value the freehold at 22k. Solicitor about to serve notice to buy. 

12 years left on lease. 

I understand that I could extend the lease for free for 50 yrs. Surveyor recommended buying now rather than this route. 
But, wouldn't it make more sense to extend by 50 years then buy the freehold after this extension to possibly make it cheaper? 

AskAsk

it should be cheaper if the lease is longer.  it could be that the surveyor doesn't think the price difference would be that much between 12 years and 50 years, and that if you wait to extend, then you will miss the auction.  the plan sounds like you buy the freehold before it gets to auction and you have to bid with other people.

eddddy

theshoefairy said:

I understand that I could extend the lease for free for 50 yrs. Surveyor recommended buying now rather than this route. 
But, wouldn't it make more sense to extend by 50 years then buy the freehold after this extension to possibly make it cheaper? 

It probably would not be any cheaper to buy the freehold after extending the lease.

A free lease extension allows the freeholder to increase the Ground Rent from it's current level to a 'Modern Ground Rent'.

LEASE gives an example of a free 50 year lease extension increasing the ground rent from £6.25 per year to £2,933 per year.

So you would then have to buy the freehold of a house generating £2,933 per year in rent - which makes the freehold more expensive.

Here's the example from LEASE: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

theshoefairy

Thank you both for clearing that up. I was just worried it was an option that hadn't been explored. Looks like they were either lying about going to auction or they have decided against it for some reason. The surveyor said it is a common tactic to get people to stump up the money out of fear. 

AskAsk

theshoefairy said:

Thank you both for clearing that up. I was just worried it was an option that hadn't been explored. Looks like they were either lying about going to auction or they have decided against it for some reason. The surveyor said it is a common tactic to get people to stump up the money out of fear. 

they may plan to auction the freehold if you are not interested.  is it a freehold of just your house?

theshoefairy

Well one they do have for auction around the corner from me is up for auction. But there is noone living in it aa far as I can tell. So far, they are not aware that I am planning on serving notice on them so I find it all very odd.