Extend lease or buy freehold?

woodpecker

Hi, we own a top floor maisonette in a Victorian house, which was converted into two flats. There is less than 45 years on the lease, so we contacted the freeholder to negotiate a lease extension, to enable us to sell the flat.

They have responded with an offer to sell us the freehold, for about 20% more than the value of the lease extension. They have only owned the freehold for approximately 12-18 months, and selling it now would generate them a massive profit.

I believe the law requires them to offer the freehold to both leaseholders (ground and first floor flats). We don't think the other tenant will be interested, as he already has over 100 years on his lease. That would leave the way clear for us to purchase the freehold.

I believe the terms of both leases mean the leaseholders are responsible for insuring and repairing their 'half' of the building; i.e. we are responsible for the first floor, up to and including the roof; he is responsible for the foundations, garden etc.

Would it benefit us to purchase the freehold and extend our lease by 999 years, and then sell the flat, along with the freehold, to a buyer? I think the freehold would enable them to extend into the loft etc. but would not make them responsible for insuring and maintaining the whole building?

We think having the freehold would increase the sale price and make the flat more attractive - is there any downside that I'm missing? 

Any advice/comments would be welcome!

NameUnavailable

Your neighbour may like to buy half a share in the freehold, or if not then you can buy it and they will become your leaseholder. Your obligations under the terms of the lease as freeholder will apply.

Yes you should buy it (whole or shared) because if you don't you have no idea who else he might sell it to (and a new freeholder could impose service charges etc).

london21

Personally will go for the freehold.
Will also negotiate. 

eddddy

woodpecker said:

I believe the law requires them to offer the freehold to both leaseholders (ground and first floor flats). We don't think the other tenant will be interested, as he already has over 100 years on his lease. That would leave the way clear for us to purchase the freehold.

You say the loft has potential for conversion - which could result in a profit being made.

So the other leaseholder might be interested in jointly buying the freehold, so they can aim to get 50% of the profit. (And get a chunk of money from you for a 999 year lease extension).



But I think you can scupper the other leaseholder's 'Right of First Refusal' - it needs more than 50% of the leaseholders to agree. If you don't agree, the other leaseholder can't exercise the 'Right of First Refusal' without you.

But then the other leaseholder might decide to bid against you for the entire freehold - so that you'd have to pay them to convert the loft, and to get a lease extension.



In theory, I guess it could get nasty, if you both want the freehold and try to out-smart each other.

But hopefully, the other leaseholder will be disinterested, and leave you to buy it cheaply.