Short lease but share of freehold flats

SXX

Hello - I am looking to buy a flat - no mortgage required as purchase will be financed from the sale of my flat / plus savings.

I'm coming across flats which have a share of freehold but short lease and wondered if anyone has any experience to share? 

is there anything specific I should look out for when I come across these types of flats?  

thank you

eddddy

SXX said:

I'm coming across flats which have a share of freehold but short lease and wondered if anyone has any experience to share? 

is there anything specific I should look out for when I come across these types of flats?  

If the lease is short, they will be difficult to resell later.

The best approach is to say that you want the seller to arrange a lease extension (ideally to 999 years) on or before completion.


More generally, you should find out what the building management arrangements are, and look at how well the building is being maintained etc.

propertyrental

Are all the leases within the relevant freehold of equally short length? If yes, then all the leaseholders (and by definition also all the joint freeholders) will want their leases extending. So they can agree to extend all the leases, at no cost, as everyone benefits equally.

But if some leases are already long, then those leaseholders, being uninterested in extending their own leases, might well want compensating financially in return for agree extensions to the short leases.

As Edddy says, how well the freehold is managed depends on factors like how interested/involved the joint freeholders are (lots of overseas BTL owners??) and whether or not they've appointed a 'good' management company.

But there again, where the freeholder is a 3rd party (not shared freehold) you are at the mercy of that 3rd party......

DullGreyGuy

propertyrental said:

Are all the leases within the relevant freehold of equally short length? If yes, then all the leaseholders (and by definition also all the joint freeholders) will want their leases extending. So they can agree to extend all the leases, at no cost, as everyone benefits equally.

It doesnt necessarily follow that all leaseholders are joint freeholders too. Our last place about 75% of the properties were joint freeholders but the remaining 25% were leasehold only. 

propertyrental

DullGreyGuy said:

propertyrental said:

Are all the leases within the relevant freehold of equally short length? If yes, then all the leaseholders (and by definition also all the joint freeholders) will want their leases extending. So they can agree to extend all the leases, at no cost, as everyone benefits equally.

It doesnt necessarily follow that all leaseholders are joint freeholders too. Our last place about 75% of the properties were joint freeholders but the remaining 25% were leasehold only. 

Fair point, though I was trying not to over-complicate things for the OP>

In that scenario, I guess you'd want to know the lengths of the leases owned by the 75% who were joint freeholders as well.

diystarter7

Hi OP

One clear advantage I know about  is when compared to most other lease extensions where the leaseholder does not own a share of the freehold, extending the lease on your share of freehold property is likely to be significantly cheaper.

As with any lease type, you have advantages and disadvantages but how it is managed is the key.

The link below for a long established EA is very informative re what you asked and a lot more

Good luck

https://www.haart.co.uk/buying/buying-advice/what-is-share-of-freehold/

JM68

If I was selling a share of freehold flat but it had a short lease and it was easy to extend (e.g. because all the other share of freeholders agreed and also had short leases and there were no other complicating factors) then I would extend before marketing.

The only reason I would do so is if there was an issue with doing so.

We viewed several like this when we were looking last year, including maisonettes where there were only two sharing the freehold, and the EA always said 'share of freehold, no problem to extend'. 

I always then responded with 'why has the vendor not done it already to make the sale easier?'. 

Never got an answer....

JM68

ooops - the only reason I would **not** do so....

SXX

JM68 said:

If I was selling a share of freehold flat but it had a short lease and it was easy to extend (e.g. because all the other share of freeholders agreed and also had short leases and there were no other complicating factors) then I would extend before marketing.

The only reason I would do so is if there was an issue with doing so.

We viewed several like this when we were looking last year, including maisonettes where there were only two sharing the freehold, and the EA always said 'share of freehold, no problem to extend'. 

I always then responded with 'why has the vendor not done it already to make the sale easier?'. 

Never got an answer....

Thanks to all for your responses - all taken on board.   When I've queried a short lease/share of freehold with EA, the response has been a breezy -'it doesn't matter if the lease is short as the prop comes with a share of the freehold.'   I didn't think it was as simple as that hence posting on here.      

eddddy

SXX said:

Thanks to all for your responses - all taken on board.   When I've queried a short lease/share of freehold with EA, the response has been a breezy -'it doesn't matter if the lease is short as the prop comes with a share of the freehold.'   I didn't think it was as simple as that hence posting on here.      

It might or might not be easy - it depends on the other joint freeholders.

That's why you could ask the seller to get the lease extension done. If it's easy, they'll get it done.

If they refuse to get the lease extension done, it suggests that there might be a problem, and it might not be easy. So you proceed a lot more cautiously - and maybe be prepared to walk away.


The best approach would usually be to extend all the the leases at the outset when they all bought the freehold. You could ask why that wasn't done.

DullGreyGuy

SXX said:

JM68 said:

If I was selling a share of freehold flat but it had a short lease and it was easy to extend (e.g. because all the other share of freeholders agreed and also had short leases and there were no other complicating factors) then I would extend before marketing.

The only reason I would do so is if there was an issue with doing so.

We viewed several like this when we were looking last year, including maisonettes where there were only two sharing the freehold, and the EA always said 'share of freehold, no problem to extend'. 

I always then responded with 'why has the vendor not done it already to make the sale easier?'. 

Never got an answer....

Thanks to all for your responses - all taken on board.   When I've queried a short lease/share of freehold with EA, the response has been a breezy -'it doesn't matter if the lease is short as the prop comes with a share of the freehold.'   I didn't think it was as simple as that hence posting on here.      

Abbreviate if you want but anyone with Agent in their title you have to be cautious of. It's a toxic title which is why you now get recruitment "consultants" rather than "agents".

There is a reason why the seller hasn't extended, it could because of naivety but that doesn't mean there is or isnt a problem but at the same time it could be there is a problem. Ultimately the agent works for the seller (up until the finer negotiations anyway) so dont think they are neutral or working for you.

Its something that needs to be dealt with, or factored in, before exchanging!