Third party companies want to buy my leasehold - why? Should I buy it, first?

MSR01

Hi. My house is a leasehold with over 900 years left on it (was originally 999 years). The owner of the freehold owns those of most of the neighbourhood, but he also lives here and has never charged anyone ground rent or for services. However, he has just written to us all saying that he has had several offers from third party companies who want to buy the freeholds from him.

This rang alarm bells. I started foreseeing being charged ground rent, services, and being fined for things like having an extension without first seeking the freeholder's permission. I'm trying to figure out where these companies are seeing their profit coming from, and I think the answer is my bank account.

The current freeholder is offering to sell me the lease for just under £1,000. Is this a good price? Is this the best thing to do, on a 900+ year lease, despite these "third party" vultures hovering overhead?

Full disclosure: I don't currently have the money, partly thanks to covid and lockdown (I qualified for very little support) and will have to take out a loan to buy it. This is why I'm hesitating and seeking guidance.

Cheers.

NameUnavailable

Hi,

You probably already own the lease, so you are being offered to buy the freehold.

A lease is basically a long term rental agreement. You don't own the building or the land it sits on.

£1000 to buy the bricks/mortar and the land is a no brainer. Do whatever you need to, to buy it.

jimbog

Buy it. For peace of mind (and the rewards of any future buyer’s peace of mind will eventually pay you dividends)

avawat20

You could end up spending just under £1000 a year on service charges so yes - I'd buy it now and do what I need to in order to get the money for it! Be far better for resale too!

goldfinches

You can probably add this on to your mortgage too as it definitely increases the saleability of your house so if you can't get the money any other way you could try talking to them about it.

eddddy

How much is the ground rent - according to the lease?

For old 999 year leases it's often £5 or £10 per year. If that's the case, £1000 for the freehold is expensive. I guess you could try a counter offer of £300 to £500.  (The freeholder will probably expect you to pay their legal fees as well, so ask how much that will be.)

But TBH, the freeholder is probably being smart. If you serve a formal notice on the freeholder you might get the freehold for much less than £1000 - but you'll probably have to pay much higher legal fees. So, for example, you might get the freehold for £300, but you'll pay an extra £700 in legal fees.

greatcrested

more information needed.

A 900 year lease is,well, almost as good as a freehold. It will certainly see you out not to mention your son, grandson, and beyond.....

So the signficant factors are the content of the lease you own, rather than its remaining length. Do you have a copy? Get it out and read it.

* does it mention ground rent? OK, the current freeholder is not collecting ground rent, but might the new freeholder? He can't unless the lease says he can, so....?

* similarly service charges? The new freeholder cannot demand these either unless the lease says he can, so....?

* what about restrictions? Does the lease restrict what you can do (eg build an extension, put up a fence at the front, keep pigs, whatever)? If so, even if you have no such plans, a future buyer when you come to sell might be put off (eg if they want to keep pigs.....)

In all 3 above cases, if there is mention, quote the clauses in full here for comment.

But if none of the above are in the lease, then there is litle value in you buying the freehold.

MSR01

greatcrested said:

more information needed.

A 900 year lease is,well, almost as good as a freehold. It will certainly see you out not to mention your son, grandson, and beyond.....

So the signficant factors are the content of the lease you own, rather than its remaining length. Do you have a copy? Get it out and read it.

* does it mention ground rent? OK, the current freeholder is not collecting ground rent, but might the new freeholder? He can't unless the lease says he can, so....?

* similarly service charges? The new freeholder cannot demand these either unless the lease says he can, so....?

* what about restrictions? Does the lease restrict what you can do (eg build an extension, put up a fence at the front, keep pigs, whatever)? If so, even if you have no such plans, a future buyer when you come to sell might be put off (eg if they want to keep pigs.....)

In all 3 above cases, if there is mention, quote the clauses in full here for comment.

But if none of the above are in the lease, then there is litle value in you buying the freehold.

The ground rent is/was £5. We used to pay it to a local solicitor, once a year, but then one day they declined to take payment and said they no longer knew who to pay it on to. That was when we discovered the original freeholder had vanished. So, for many years no one has paid their ground rent. The current freeholder gained ownership of the freehold when he bought the old freeholder's house (where the original freeholder had not been resident). The new freeholder hasn't charged rent in the years he's been here, either, or made any demands. People have had to notify him if they've remortgaged, and that's it. I mention all this by way of explaining the context of the following...

The leasehold agreement has this to say on the subject of rent (and this, I think, is probably the reason for the interest of the third party companies (read: vultures) in purchasing the freehold):

IF the rent hereby reserved or any part thereof shall be in arrear and unpaid for twenty one days after the same shall have become due (whether legally demanded or not) or if there shall be any breach non-performance or non-observance of the lessees covenants herein contained then and in any such case it shall be lawful for the Lessors to enter upon the said plot of land and the buildings for the time being thereon or any part thereof in the the name of the whole and to repossess the same as of their former estate.

My layman's interpretation of this is that it is my job to pay the rent, whether or not there is someone to pay the rent to. And even if I find it impossible to pay the rent (because the freeholder has vanished, and/or the solicitor refuses to take my money, which they did) then it is still my fault that I couldn't pay the rent. In other words, they've got you coming and going!

My uneducated view is that while I don't think the vultures intend to evict, I wonder if they intend to levy fees/fines/charges for breach of the convenants. In other words, a protection racket. A legal one.

If not that, then can they charge back rent? There's no such provision. Does there need to be? Is that right conferred by other law?

But even if not, they can certainly start charging rent from the moment they purchase the freehold. How much might that be? A few hundred or a few thousand?

The lease also gives them or their agents right of access to inspect the property to determine the state of repair or general quality of the buildings, outbuildings, surrounds, etc. (messuage). But that paragraph does not mention anything about being fined or required to pay the freeholder compensation, only that the lessee is required to make good any such deficiencies that the freeholder, his surveyors or agents discover.

I can't find any mention of service charges, or as far as I can tell any other term or phrase that might refer to them.

As for restrictions, I can't find anything that expressly prohibits or requires the permission of the freeholder be gained before making any alterations or additions. If there is such a requirement, I presume that would constitute a breach of the covenant and possibly open the door to the vultures getting legal redress against the lessee... i.e. money.

Many of the houses have had significant alterations, extensions and other work done down the years, including mine, most of which where done after the original freeholder went missing. The closest mention of any requirement for permission is in reference to rectifying damage, such as the house burning down. In this case we're required to get the freeholder's agreement to our plans to replace/repair the building, and that we have to do it to a high quality (worth twice the value of the ground rent, so... £10!). I can quote that passage if relevant, but there's no mention of charges in it. Just the proviso that we get his agreement and that it's got to be worth twice the rent.

Cheers

teachfast

Really interesting issue and discussion. Thanks for the detail. 

Everything about this screams: buy the share of the freehold. I don't think it will mean no future charges but if you are a freeholder you will be helping to manage those charges.

AdrianC

A grand... plus, I presume, legal costs? On both sides...?

Are all the freeholds under a single title currently, or are they already split?
Is it/are they registered with Land Registry?

davidmcn

The freehold of your property sounds like it's worth buttons. I can't see any real risk to you in it changing hands. But maybe the entirety of the freehold title includes something of more value (eg anything in vacant possession, or shorter term leases) which is why somebody is interested in acquiring it.