Freeholder problems - leaseholder proposals to an extension that will increase value of the flat

Feebs77

Hi all,

I bought a 1 bed flat, and I want to do a single storey extension, so I have enough space to add a second 'bedroom'.

Assuming it all complies with building regulations, can the freeholder ask me to pay for a percentage of what it will be worth once the extension has been completed?

The flat will be worth considerably more as a 2 bedroom. However most of the value will be in the huge open plan living room, kitchen diner that I'm proposing in the rear single storey extension. The second bedroom with be less than a single size (8m2).

I have already applied to the freeholder for permission. The freeholder is the local council.
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In my application I have called this second 'bedroom' a study / spare room as that is what I'm using it for.

It has been almost 1 year and the freeholder is taking ages to get back to me. If they refuse me, can I appeal and say they are withholding reasonable consent?

I know the council are really against any development that require a change to service charges, and I share the service charges with a flat upstairs occupied by council tenants.

Any advice much appreciated!

eddddy

Feebs77 said:

Assuming it all complies with building regulations.....

You will also need to get planning consent. (There is no permitted development for flats.)

Feebs77 said:

It has been almost 1 year and the freeholder is taking ages to get back to me. If they refuse me, can I appeal and say they are withholding reasonable consent?

That's a very complex question.

As a starting point. What is the 'status' of the land that you want to build the extension on? For example...

• 1) Is it land that is demised to you in your lease?(i.e. the land 'belongs' to you)

• 2) Is it land that belongs to the freeholder, but you have the exclusive right to use it?

• 3) Is it land that belongs to the freeholder, but you and your neighbour both have the right to use it?

The next question would be "what does your lease say about 'alterations' to the flat? For example...

• Does the lease say no alterations?
• Does the lease say no alterations without consent?

Feebs77 said:

I know the council are really against any development that require a change to service charges, and I share the service charges with a flat upstairs occupied by council tenants.

Let's say you are currently responsible for 50% of the repair and maintenance costs of the current building - through the service charge.

If you build the extension, often that would be unchanged - you would still be responsible for 50% of the repair and maintenance costs of the current building. But you would also become responsible for 100% of the repair and maintenance costs of your extension.

(But there would also be the issue of how the extension is insured.)

Feebs77 said:

can the freeholder ask me to pay for a percentage of what it will be worth once the extension has been completed?

It depends on the answers to the questions above. In simple terms....

• If your lease allows you to build the extension (e.g. with consent) - your freeholder cannot charge you a premium for giving consent.

• If your lease doesn't allow you to build the extension - your freeholder can charge you a premium. The premium can be any amount - not necessarily a percentage of the property value.

They'll probably need to be a lease variation as well, to update the lease plan. You'd have to pay for that as well.

hazyjo

What sort of space would you be extending into? Private garden, or communal garden? If the latter, I expect extending won't be permitted in your lease.

Might actually be cheaper to move. Builders/materials aren't cheap!

Feebs77

Thanks for all the advice. I never done such I complex job before, and never again. 

Yes I'm a leaseholder and it states in my lease I can extend and alter anything inside my demise line on my leaseplan - with permission from the freeholder which cannot be unreasonably withheld.

I currently pay 40% of the service charge, even though my flat is half the size of upstairs flat which is being used as a 3-4 bedroom when mine is only 1 bedroom.

I am proposing an extension mostly within my demise which the freeholder doesn't have a problem with.

I was just interested to know if the freeholder can profit from my development? Changing it from 1 bedroom to 2 bedroom? The second bedroom is a single which I am calling a study for planning and freeholder application purposes.

The freeholder may want to reclassify my flat as 2 bedroom, and increase my share of the maintenance however unfair, and something I need to contend with later on.

I also have accepted I have to pay for new demise lines to be redrawn by the freeholder. I don't have a problem as cost isn't that high.


My freeholder application has been going on for 1 years and the 2 key things my freeholder has a problem with is:

1)  I want to demolish a party structure that I share with the upstairs flat (occupied by their tenants) to replace with my new extension.

The party structure is being used by upstairs flat as a landing with stairs to access their garden and I use it as a 'room' underneath for storage. I am including it within the GIA for the purpose of the planning application, although it can only be accessed from my garden.

It is in poor repair (with what appears to be asbestos) and better to demolish and rebuild as part of the new extension and reinstate a new party structure with a new stair and landing for neighbours upstairs.  

2) I want to use (what I think) is an old coal store hidden behind a wall in my kitchen.

It is not being used by anyone and not on any deeds.
I want to access and use it and it cannot be accessed by anyone else.
The freeholder is having a real problem with letting me have this coal store.




The freeholder is telling me they have to calculate if I am going to profit from 1) or 2) above - and presumably want some money from me. I don't know yet as they can't come to any conclusion.

I really don't know what to do.

eddddy

Feebs77 said:

I was just interested to know if the freeholder can profit from my development? 

The freeholder is telling me they have to calculate if I am going to profit from 1) or 2) above - and presumably want some money from me.

Just to clarify my previous answer - if the freeholder wants you to pay them some money, that money is called a "premium".

(The premium might be "a percentage of profit" or it might be any other amount that the freeholder chooses.) 


As I explained in my previous answer...

• If you want to do something that your lease allows you to do - the freeholder cannot charge you a premium

• If you want to do something that your lease does not allow you to do - the freeholder can charge you a premium (of any amount they choose)

It sounds like they might be choosing to charge you "a percentage of profit".

Feebs77 said:

I am proposing an extension mostly within my demise which the freeholder doesn't have a problem with.



2) I want to use (what I think) is an old coal store hidden behind a wall in my kitchen.

It is not being used by anyone and not on any deeds.
I want to access and use it and it cannot be accessed by anyone else.
The freeholder is having a real problem with letting me have this coal store.

So the coal store isn't within your demise. So presumably it is retained by the freeholder (i.e. it 'belongs' to the freeholder).

In that case, your lease won't allow you to use the coal store. So the freeholder can charge you a premium for "selling" the coal store to you and letting you use it.

The freeholder can ask for any premium they choose. For example...

1. The freeholder could ask for £1
2. The freeholder could ask for £100,000
3. The freeholder could calculate a percentage of profit, and ask for that

You suspect that the freeholder will go for option 3. If you don't agree with the premium the freeholder asks for, you can make a counter offer, and try to negotiate.

Or the freeholder can simply refuse to let you buy/use the coal store.

Feebs77 said:

1)  I want to demolish a party structure that I share with the upstairs flat (occupied by their tenants) to replace with my new extension.

Again, your lease won't allow you to do this - so it's entirely up to your freeholder whether they decide to allow this, and how much premium they will charge.

Feebs77 said:

The freeholder is the local council.
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I suspect that a council will be super-fussy about this - especially as they have a tenant upstairs.

• They'll probably want reports from your surveyor, your structural engineer etc, before they'll give consent.

• They'll want their own surveyor, their structural engineer, their legal team etc to look at your application - which you'll have to pay for

• They'll probably want schedules of work - showing things like how the asbestos removal will be done, how inconvenience to their tenant will be minimised

• They'll probably want to approve the contractors you use to do the work

Realistically, you might have to hire a big contracting firm who are experienced in doing work for councils, and can meet all their requirements. That might cost more than you expect.

Feebs77

HI eddddy,

Yes I think you've about summed up my problems.

The last conversation I had with the Council Freeholder, they told me they were having 'difficulties' trying to see how demising me the coal store would increase the value of my flat.  

The thing is, it won't that much, because the coal store only about 1m2, and I only want to use it to access a low inaccessible part of my front garden for maintenance.

My garden is on 2 extreme levels which I want to terrace, making it easier to use and access.
Currently I need to go up stairs, down a shared path then into my front garden.

If I am demised the coal store I can directly access the front garden from inside my flat.

But it definitely won't increase the value of my flat by that much, and if the freeholder demand this, then I will just leave it be.

Not sure how to approach the freeholder regarding offering a small lump sum - it can't be worth more than £1-2k!

Feebs77

Regarding the shared landing which is a party wall structure.

The freeholder trying to make me develop the landing, as an amenity space for the upstairs flat. (It would be part of the flat roof to my extension).

As I know there is no possible way I can get planning permission for that - I am going to correct the freeholder and not promise that.

Instead I am going to propose that it is a degraded structure. And if I am not allowed to replace it, then I will be applying to the freeholder to replace it (i.e. they would need to remove the asbestos, put in a new concrete slab landing as existing is cracked, and a new metal railing.

What do you think the best strategy?

eddddy

Feebs77 said:

What do you think the best strategy?

TBH, I think the best strategy is to be friendly and as cooperative as possible with the council.

From what you say, they are not legally required to give you consent for this - so if you become 'a pain' they might just say "No", to get rid of you.


In your position, I might try to take a bit more control of the situation, and present some solutions. For example...

• Hire a RICS valuer/surveyor to value the coal shed - tell them why you want the valuation, and that you will send a copy of the valuation to the council. And offer the council whatever the RICS valuer suggests.

• If you are sure that you wouldn't get planning consent for the upstairs amenity space - then say "I agree to create the amenity space, if the planning department grant planning consent." (Out of interest, why are you so sure?)

Explain to the RICS valuer that you want to acquire the coal shed, but you will be creating a new amenity space for the freeholder. Maybe the RICS valuer will devise a formula like...

50% of the value you will derive from having the coal shed is £10k, the value you will be giving the freeholder by building an amenity space for upstairs is £8k - so you're offering the freeholder £2k.


But maybe consider the possibility that you can't get consent for the amenity space.

Feebs77

I have since drilled a hole in my wall - and found a large void behind it - which I believe to be the old coal store. 

This old coal store is on the same level as my basement flat.

Do you think it's reasonable of me to ask my freeholder to:

"update my lease plan to include the coal store, which is only accessible from my basement flat, and historically would have used the coal store in the past, but which previous owners have blocked up"

The freeholder (local authority) has made slight errors elsewhere in drawing my lease plan, and the freeholders surveyor verbally told me my plans might have been loosely based on the layout of a similar basement flat.

Feebs77

If the above doesn't work and the freeholder won't admit the coal store was mine - as per eddddy's advice - I spoke to an RICS surveyor about trying to acquire the lease from the freeholder...

The surveyor told me that I should tell my freeholder that the cost of the works to make the coal shed serviceable would outweigh the uplift value, and there would be no profit in acquiring it, in terms of cost per m2.

Obviously having the coal store as a more accessible entrance would make the flat more desirable, so the
 surveyor advised I should offer a nominal sum of around £1k.
If the freeholder ask me to obtain an RICS valuation on this it'll cost another £1k.

Which route do you think I should go down?

1) Get the freeholder to agreed that there was an error in my lease plan, which should have included the coal store, and I pay them to update the lease plan with the coal store included?
or 
2) provide freeholder with an RICS valuation of the coal store proving it's of no market value? And offer them an additional nominal amount? 

I think there's less bureaucracy and cost to the freeholder, with option 1)

What do you think?

eddddy

Feebs77 said:

1) Get the freeholder to agreed that there was an error in my lease plan, which should have included the coal store, and I pay them to update the lease plan with the coal store included?

I don't understand why you think there was an "error" in your lease plan. From what you've said, it sounds like...

• The council sold the leasehold flat excluding the coal store

• The lease plan correctly shows that the flat excludes the coal store

Is there some other legal document that suggests the coal store is included as part of your flat? (For example, does the lease mention that the coal store is included as part of your flat?)

Or do you mean something else?



If you mean...

• The council was silly not to include the coal store with your flat when they sold it - and/or

• The council might not have realised that a coal store existed, and would have included it with the flat if they had known 

... maybe that's true. But that doesn't make the lease plan wrong. It just means the council sold the flat excluding the coal store, and you have now bought the flat excluding the coal store.

I would follow your surveyor's advice, and make a nominal offer.


The council will almost certainly expect you to pay their legal costs as well - including the cost of producing a new lease plan, and a deed of variation.