Company offered me the chance to purchase my property freehold? What's your opinions? Should we buy?

FrankFalcon · 7 February 2023 at 12:18PM

Hi Guys

My family owns a small terraced house in the North of England that we rent out via a proper estate agent. Everything is fine and dandy and has been for the last 5 years with the same tenant etc. Today, we received a letter (attached) from the agents of the company who own the freehold asking us if we want to purchase the freehold and before we do anything I would like to gauge a few opinions. I know some people will say that we should seek legal advice and not take advice from people on here, but in my experience, I have found people on here who actually work in the specific field of question and they can offen (and have previously) provided invaluable knowledge.

So, I'll give some brief info about the property:

We bought it 8 years ago for £50,000. On Zoopla, a house a few doors down has recently sold for £100,000. We rent it out for £595 PCM. The ground rent is currently £2.50 per year. Yes, £2.50!. So, I was asking my pal (who used to be a letting agent, before he retired) in the pub yesterday and he said to me "You should buy it. It's a fair deal". Just then another guy said, "Hang on, I'm sure I read somewhere the other week that if Labour gets in they will do away with ground rents anyway, so you might be paying for nothing". Then another guy said, "No, It's Tories who want to get rid of it".

Now, I make it clear at this point, that I intend not to take advice from any blokes down the pub on such a matter, but I just want your opinions. Maybe some of you on here have had such dealings? Maybe some of you will tell me the costs are reasonable/unreasonable? As I said, I am not looking for legal advice, just people's opinions on this offer and if you guys know of any pro's and con's that are not inevitable.

Thanks in advance.

eddddy · 7 February 2023 at 1:24PM

The ground rent aspect is pretty much irrelevant. Using the government's current formula, the value of the ground rent is about £40.

(It's unlikely that any government would simply 'cancel' existing ground rents - but even if they do, it would save you a grand total of £40.)

So it doesn't make financial sense to buy the freehold to get rid of ground rent, you would buy it for other reasons.

The most common reason for buying a freehold in your circumstances is to free you from the covenants (or rules) in the lease. Those covenants might be:

You need consent for alterations (and have to pay a fee for getting consent)
You need consent to keep a pet (and have to pay a fee for getting consent)
You are prohibited from subletting part of the property

There might also be covenants like:

You are prohibited from extending the property

... but that type of covenant might remain.

However, £1,100 for the freehold sounds expensive, but £450 legal fees sounds fairly cheap. You can try negotiating on the price if you want.

I'd be tempted to hire my own solicitor as well, but that will be more fees.

And/or the government's reforms might make it cheaper and easier to buy the freehold at some point in the future.

daveyjp · 7 February 2023 at 2:49PM

I'd generally advise to buy a freehold, but how long is the lease?

dimbo61 · 7 February 2023 at 2:50PM

This could be an old rentcharge which run out in 2037 !
So you might owe 6 years back ground rent charge £15 and they want to sell you the remaining rentcharge for 2023 till 2037 or 14 years at most.
So if they are asking £15+£35 to buy the rentcharge then I would buy it ASAP.
It will come up on the Land Registry when you try to sell

eddddy · 7 February 2023 at 3:17PM

dimbo61 said:

This could be an old rentcharge which run out in 2037 !

The letter from the management company says the house is leasehold. Rentcharges don't apply to leasehold properties.

The letter also refers to Ground Rent, rather than a rentcharge.

So if the letter says the house is leasehold with a ground rent, I think it's unlikely to be freehold with a rentcharge.

user1977 · 7 February 2023 at 3:36PM

Any leasehold reform will not simply wipe out ground rents, at most it will oblige freeholders to sell the freeholds. Against 'uman rights to have property taken away from you with no compensation...

dimbo61 · 7 February 2023 at 3:59PM

Sorry did not see the letter on my phone.

knightstyle · 7 February 2023 at 4:20PM

I think freehold is far more desirable than leasehold. I would offer £800 to include all fees and see what come back.

gazfocus · 7 February 2023 at 5:42PM

We are looking at houses at the moment and are instantly dismissing leasehold ones. We can't be the only ones so if you plan on selling in the future, something just to bear in mind.