How to buy a House Freehold

CDaveH

Hi
Does anyone have information about buying a house freehold?

Online the freeholder company appear to be sharks.  The previous owner was told they wanted almost 18k.
Does anyone know how we can calculate the cost of the freehold to ensure we’re not being fleeced?

TIA

TBG01

So you don't know how they calculate it, but automatically assume they're sharks? How long is left on your lease? £18,000.00 could be a bargain if you've let it run down further. 

CDaveH

The house has 950+ yrs left on the lease.
Sharks is what is quoted by others on the internet reviews.

eddddy

Is it escalating ground rent terms that are making the freehold expensive? 


For example, does your lease say that the ground rent doubles periodically, or increases with RPI, or increases with the value of the property?


There are online calculators like this one - but they don't handle escalating ground rents.  https://lbb.org.uk/calculator/

(And this calculator only goes up to leases of 100 years, but 100 years vs 995 years wouldn't make too much difference with a fixed ground rent.)

user1977

eddddy said:

Is it escalating ground rent terms that are making the freehold expensive? 

For example, does your lease say that the ground rent doubles periodically, or increases with RPI, or increases with the value of the property?

There are online calculators like this one - but they don't handle escalating ground rents.  https://lbb.org.uk/calculator/

(And this calculator only goes up to leases of 100 years, but 100 years vs 995 years wouldn't make too much difference with a fixed ground rent.)

I think it's pretty rare for an ultra-long lease to have any significant rent. So unless there's something else unusual about the lease, £18k sounds...excessive.

CDaveH

Hi thank you yes the ground rent increases every 3 years with RPI.

user1977

CDaveH said:

yes the ground rent increases every 3 years with RPI.

And how much is the rent?

eddddy

CDaveH said:

Hi thank you yes the ground rent increases every 3 years with RPI.

If the RPI increases continue for the full 950 years, that will make the freehold very expensive. What is the initial ground rent?


If you've owned the house for over 2 years, you probably have the right to compulsorily purchase the freehold - it's called enfranchisement. The price would be calculated using a statutory formula, but it's not an 'exact science'.

You could ask a freehold enfranchisement valuer for their valuation estimate for buying the freehold that way - to see if £18k is reasonable (But they'll charge a few hundred to do a valuation, and legal fees for enfranchisement are likely to be higher).


Then you can decide whether to...

• Accept the freeholder's offer of £18k
• Try to negotiate the freeholder down
• Go down the compulsory purchase (enfranchisement) route
• Walk away

CDaveH

Hi
Thanks for the information.  The ground started at 250 it’s now £324

user1977

CDaveH said:

The ground started at 250 it’s now £324

In which case broadly speaking the freehold is worth whatever a similar investment would need to be in order to generate £324 income a year. Which makes £18k sound in the right ballpark if you look at current interest rates.

CDaveH

That’s interesting thank you for your help