Buying a leasehold

tracywilko

Hi, i am selling my house and did have a buyer but they dropped out because they were not aware that it was leasehold and not freehold because they want to make changes to the house such as extensions etc. I just wondered if it is worth me asking my leasehold owners how much they would want to buy it so that I can give that info to potential buyers.  Does it work like this?! 

princeofpounds

You mean is it worth you asking your freehold landlord how much they want for it? You would be buying the freehold. You already own the leasehold. 

Does it work like that? Possibly, but it's only a fraction of the story.

There are two ways you can buy your freehold, assuming you are eligible (in a house as opposed to a flat, you almost certainly are).

1) The informal route. This is a simple negotiation. It has the advantages of being relatively fast, and straightforward in terms of legal work. The downside is that the freeholder can ask for whatever price they want.

2) The formal route. You use something called the 'statutory process' (i.e. a process defined in law) to buy the Freehold. You apply to a Tribunal, which values the freehold for you using an independent valuation and a formula. It has the advantage of a certain outcome and a predictable price. The downside is that it takes a long time and costs more in legal fees. 

In practice, what usually (but not always) happens is that you try the informal route and ask the freeholder. They send through a price - it may well be too high. If it is too high, you remind them that you can apply via the formal route. They will often come back with a more reasonable offer, as they know they will be forced to sell, but it may be a little bit higher than the expected formal price because it is more convenient and will cost you less in fees. You accept that, assuming it is reasonable, and the lawyers get to work.

For a more detailed and proper discussion of the topic:
https://www.lease-advice.org/advice-guide/houses-qualification-valuation/

In your situation - yes, it would be good to be able to tell prospective buyers what it would cost to buy the freehold. You can tell them one of both of the following:

- You have contacted the freeholder, and they have quoted a figure of £X to you. Obviously you cannot guarantee they will offer the same price to the new owners but it's a good indication.

- You can value the freehold under the statutory process formula. You can do this quite accurately with an online calculator if the lease is long (>80yrs) and ground rent does not escalate (does it?). Or, you can get a RICS surveyor to value it if it's a bit more complicated.

You should be reminding prospective buyers:
- If the house is eligible, they will be able to buy the freehold, no doubt.
- You can issue the notice for the formal period before you depart and assign it to them, which means there is no 2yr minimum waiting period before they can do it.
- Sometimes there is an advantage to buying a leasehold house like this - you pay a little less up front and then you have some time to top up to owning the freehold.

daveyjp

It depends why the property is leasehold.  If it is just a ground rent payment for the freeholder buying the freehold is sensible.

If the lease is in place to also cover obligations for other charges for repairs, maintenance of common areas, roads, streetlighting etc the decision to buy the freehold may not be as clearcut as these obligations would still need to be in place.

davidmcn

Leaving aside everything else about the leasehold, bear in mind that covenants like the one you refer to may apply irrespective of whether the house is leasehold or freehold. Having to apply for consent is hardly all that unusual, you were possibly just unlucky that your buyers were spooked by it.

tracywilko

Wow, it sounds complicated! The good news is that we only pay a bit of ground rent and there are no other obligations involved re road repairs etc.
Thanks