Lease vs share of freehold

pole-from-north-pole

I am in the beginning of the process of buying my first home. I am not sure if I do understand real difference between Leasehold and Share of Freehold.

I have found property which is a first floor flat in Victorian house and it's a part of Freehold shared with two more flats. Remaining lease is 80 years.

How can I find out how much would cost extending remaining lease? Is it going to be as expensive as it would be simple leasehold, not a share of freelease?

Can I extend it myself or do we have to apply together with the owners of other flats?

Can I do it straight after purchase or do I need to wait for two years?

canaldumidi

The building sits on a piece of freehold land which is owned by a freeholder. In this case the freehold is shared by more than one person (probably 3 in this case, but not necessarily), and you are buying that share.

Within the building are 3 flats, each granted a lease by the freeholder, meaning the owners of those leases can live there for X years (maybe originally 99 but now 80 years left). You are buying that lease as well as the share of freehold.

The lease can be extended, by agreement with the freeholder (ie the 3 people jointly agree), possibly free (if the other leases are extended at the same time so everyone benefits), or possibly by paying for the lease extension. The money paid would be shared by all the joint freeholders, including you.

If the other freeholders agree you could extend immediately. If they don't, you'd have to wait 2 years to use the legal right to force them to extend.

Best to knock on their doors and see how cooperating they are likely to be, both as neighbours, and as joint freeholders!

bouicca21

I’d be asking if the lease could be extended as part of the purchase. 

Possibly all the leases are for the same term so all need to extend and will be happy to do so at minimal cost.  

Possibly all are for the same term but the others don’t see any point in extending as they are not planning to sell.  

Possibly the other leaseholders are rubbing their hands at getting some cash out of extending the lease.  

You just don’t know until you ask and get some sort of binding guarantee.

eddddy

In simple terms, a block of flats usually has 2 types of owners:

• Freehold owner - they own the building and the land in perpetuity (i.e. forever)

• Leasehold owners - they have the right to use part of the building as a flat for 80, 100, 125 years (or whatever period the lease says)

Usually, but not always, the freeholder is responsible for insuring, maintaining and repairing the building - but the leaseholders have to repay the freeholder everything they pay out for this.

The freeholder can also extend leases if they want, but they usually expect money in return for doing this.



Sometimes the leasehold owners of the flats club together and jointly buy the freehold of their building and land - estate agents call this "Share of Freehold". So now the ownership structure is:

• Each leasehold owner still owns their own leasehold flat

• A group of the leasehold flat owners now jointly own the freehold building and land

This can often be good - the leasehold flat owners can jointly make decisions about insuring, maintaining and repairing the building, and extending leases etc.

But this can sometimes be terrible - a bunch of strangers jointly buy the freehold of a building, and everyone has different ideas; or everyone argues; or nobody is motivated to get repairs done; or somebody is dishonest with the repairs money; etc.


So regarding the lease extension - the first question is why didn't the joint freeholders agree to do that when they bought the freehold?

Is it because they are incompetent or lazy - or is it because there were arguments about money etc?

The joint freeholders have the power to extend leases whenever they want - and they can choose to do it for free, or they can ask for payment. (But there will always be legal fees as well.)

canaldumidi

eddddy said:

The joint freeholders have the power to extend leases whenever they want - and they can choose to do it for free, or they can ask for payment. (But there will always be legal fees as well.)

Just to be clear though, that has to be a joint decision (usually unanimous, possibly majority vote) by all the owners of the freehold shares. Individual shareholders of the freehold do not have this power in isolation.