To buy freehold or not?

eddddy

mizzbonita said:

Would you say it’s not worth pursuing a share of the freehold then? 

Shared freeholds can sometimes be great, and sometimes be a nightmare. It depends on the specific people involved.

These days, there are many more posts on these boards about Shared Freeholder nightmares, than 3rd party Freeholder nightmares. (But that's probably not a very scientific survey.)


In simple terms, a freeholder is usually responsible for things like:

• Insuring the building
• Repairing and maintaining the building
• Giving consents for alterations etc
• Sending out bills
• Extending leases
• The legal aspects of being a landlord
• Providing information when a leaseholder wants to sell their flat

If you have a '3rd party' freeholder they will look after all that.

• If they're a good/nice 3rd party freeholder - that will probably be fine
• If they're a bad/nasty 3rd party freeholder - that could be a nightmare for you

If you opt for a 'shared freehold' - you will have to work jointly with the 'stranger' who buys the other flat to do all those things.

• If that 'stranger' turns out to be sensible, knowledgeable, diligent etc - that will probably be a good result
• If that 'stranger' turns out to be clueless, lazy, nasty etc - that could be a nightmare

For example, if you opt for a shared freehold, and you then decide to sell your flat - the 'stranger' next door will have to get involved with solicitors, sign forms etc. 

If the 'stranger' refuses to get involved (e.g. because they are lazy, confused or spiteful), it could scupper the sale of your flat.


If you decide to go down the 'Shared Freehold' route - talk to your solicitor and the freeholder about the joint freeholders signing a "declaration of trust". That should reduce some of the risks.

mizzbonita

eddddy said:

mizzbonita said:

Would you say it’s not worth pursuing a share of the freehold then? 

Shared freeholds can sometimes be great, and sometimes be a nightmare. It depends on the specific people involved.

These days, there are many more posts on these boards about Shared Freeholder nightmares, than 3rd party Freeholder nightmares. (But that's probably not a very scientific survey.)


In simple terms, a freeholder is usually responsible for things like:

• Insuring the building
• Repairing and maintaining the building
• Giving consents for alterations etc
• Sending out bills
• Extending leases
• The legal aspects of being a landlord
• Providing information when a leaseholder wants to sell their flat

If you have a '3rd party' freeholder they will look after all that.

• If they're a good/nice 3rd party freeholder - that will probably be fine
• If they're a bad/nasty 3rd party freeholder - that could be a nightmare for you

If you opt for a 'shared freehold' - you will have to work jointly with the 'stranger' who buys the other flat to do all those things.

• If that 'stranger' turns out to be sensible, knowledgeable, diligent etc - that will probably be a good result
• If that 'stranger' turns out to be clueless, lazy, nasty etc - that could be a nightmare

For example, if you opt for a shared freehold, and you then decide to sell your flat - the 'stranger' next door will have to get involved with solicitors, sign forms etc. 

If the 'stranger' refuses to get involved (e.g. because they are lazy, confused or spiteful), it could scupper the sale of your flat.


If you decide to go down the 'Shared Freehold' route - talk to your solicitor and the freeholder about the joint freeholders signing a "declaration of trust". That should reduce some of the risks.

Thank you so much for your advice on this. I don’t think I’m going to pursue it as I am looking to sell my flat next year I don’t want the possible hassle of having to deal with a difficult freeholder 

AlexMac

I don't see you'll have a problem with the status quo.

I was in the reverse position to you; in the late 20th Century, I bought a three storey Victorian House at auction.  I bought the freehold plus vacant possession of the two upper floors; the self-contained semi basement flat was a leasehold with a resident leasehold owner.

The place was a wreck, but luckily I got on well with the downstairs leaseholder. She coughed up her share of roof replacement, in line with the lease's requirements.  She never asked about buying a share of the freehold, so I never offered; didn't seem to be an issue?

I'd thought that a mortgage might be tricky with this tenure, but neither Natwest Bank nor the Halifax had problems with it (yes, I know I was mad to buy an auction property on a standard residential mortgage given the 28-day completion deadline, but despite NatWest letting me down after a promise, and the 28-days including Christmas and New Year, Halifax saved my bacon. But that was when you could walk into a branch and talk to a human Advisor!)  I assume your lender is equally helpful? 

When I sold on, three years later, totally refurbished and at a humungous profit, I considered drafting a new lease and keeping the freehold.  But a RICS mate said it would just be a liability; I'd be liable for insuring the overall building- which is usually spelt out in your neighbour's lease as a Freeholder rsponsibility-, collecting Service Charges, repairing commn areas etc.... so I sold the freehold title without bother to a lovely Eastern European owner-occupier couple.  She even gave me a present of a bottle of Polish Wodka!

So assuming whoever buys is properly advised by their solicitor, I can't see a problem.  If they are an absentee landlord who lets the bulding deteriorate as my seller did (my first job was to clear to leaky loft of half a dozen bin bags of guano and dead pigeons who'd been roosting there fro years!) then you might need to remind them, but unless they're idiots, they'll realise it will be in their interests to behave responsibly or you won't cough for joint external works?  

mizzbonita

Thanks Alex. 

mizzbonita

Sorry I have seperatelt questions as I’m still debating this !

I currently don’t pay service charges. Ground rent was peppercorned when I extended my lease. Could service charges become a thing with the new freeholder?

The two flats are unusual in that we both seperately buy our own buildings insurance (so I’ve always had to go with specific insurance companies that do this). So this is probably why I’ve never paid a service charge. Previously any works needed for communal areas we agreed to split the cost amicably. 

Jonboy_1984

The costs you are responsible for (jointly or individually) will be set out in the lease.

Service charges are the standard way of the freeholder managing it, with a clear process, but sounds to me like you have simply had a informal arrangement to date and been happy with it.