Landlord selling freehold

NameUnavailable

If you buy the freehold you will collectively be able to employ whichever management company you want or do it yourselves (unless there is some onerous clause in the leases).

You will still have to contribute to the charges for the estate upkeep.

deejaybee

The current management company replaced one that most residents were not happy with ( based quite a long way away, and often slow to respond to requests etc )  The "new" company are based in same town, although not perfect, have performed better, and also the management fees are cheaper.

My current thoughts :  With around 110 years left on lease, and no plans on moving elsewhere in the forseeable, will wait it out till 2024/2025 when hopefully the Government Leasehold changes may have come to fruition, if they havnt, or the changes dont help, would then be in a position to do a statutory lease extension.

I have no idea what the other flat owners are planning to do, i only know a couple of the others to talk to, most dont actually live there...

eddddy

deejaybee said:

I should have made clear that there is already a Management Company.

If you have a 'standard' two-party lease between freeholder and leaseholders - if you collectively buy the freehold, you become responsible for the management. If you want, you can hire a new management company of your choice, and instruct them on how you want the building managed.

If you have a tripartite lease between freeholder, leaseholders and management company - the management company would remain in place. But you can remove them and replace them by a different legal process called 'Right to Manage'.

deejaybee said:

It is an estate where there are freehold houses and leasehold flats.

You would 'break away' from the freehold house owners - and just own/manage your own block.

(But you might still have to pay towards any communal facilities that you share with the freehold house owners.)

Wanderingpomm

It’s worth remembering the freehold will only be sold if the new company can make a decent profit on it. The charges will invariably go up.
yiu would be better to buy it and put in your own management company 

eddddy

Wanderingpomm said:

It’s worth remembering the freehold will only be sold if the new company can make a decent profit on it. The charges will invariably go up.
yiu would be better to buy it and put in your own management company 

That's not usually the reason people/companies buy the freeholds of larger blocks of flats. They usually buy them as an investment.

Based on the OP's numbers, it would work like this:

• The freehold is being sold for £55k

• The ground rent income until 2023 is (£234 x 9)  = £2106
• The ground rent income after 2023 with the RPI increase might be (£310 x 9) = £2790
• The ground rent income after 2033 with another RPI increase might be (£410*9) = £3690
• etc, etc

So...

• Until 2023 the guaranteed yield on £55k is 3.8%
• After 2023 the guaranteed yield on £55k might be 5%
• After 2033 the guaranteed yield on £55k might be 6.7%
• etc, etc

There are very few low-risk investments with those kind of yields. That's more likely why somebody wants to buy the freehold.


(Ironically, when ground rents become 'banned', investors will no longer want to buy freeholds. So rogue companies who want to rip-off leaseholders with excessive service charges might start showing an interest in the new 'super-cheap' freeholds.)