Offer to buy Freehold

Lizzog

We've just received a letter from Korax LLP saying they are offering us to buy our Freehold for £1,900 - this offer ends at the end of the month.  We've only lived in the house just under a year, and the original lease is from the 1930's with a long term.  I want to buy it but wondered if anyone had any dealings with Korax LLP or any advice to offer?  I'm not sure where, but I'm pretty sure I've heard bad things about Korax - have I imagined this??

eddddy

• How many years are remaining on the lease, and how much is the ground rent?

• Does the £1,900 include the freeholder's legal fees?

• You would probably want to hire your own solicitor - which will mean more fees

• And a slightly tougher question... Are there any intermediate leases (or headleases)? Do you pay ground rent direct to Korax, or to somebody else?

As a rule of thumb, the first price a freeholder offers is often ridiculously high. 

And the bit about the offer ending at the end of the month is likely to be puff. 

(There's a good possibility it's like when a used car dealer says "I can only offer you the car at this price until the end of the month". Then if you don't buy it, you might find they ask for a lower price next month, because they can't get rid of it.)

Lizzog

I believe that it's 800 years from 1929 and we pay £5 to Korax once a year for the ground rent.  I'd be inclined not to instruct a solicitor to help with this as I know of other people who haven't done so.  Their letter states that this includes all of their fees but not the £45 to HM Land Registry for their fees.    This is the first and only letter I have had from them offering to buy the leasehold.  This is our second long leasehold property that we have owned and we never heard from the first leaseholder at all in 25 years, other than to collect ground rent, so this is a bit new to me!! 

eddddy

Based on £5 per year ground rent, and 800 years on your lease - a tribunal would say your freehold should cost about  £80.



By coincidence, here's a tribunal case that's almost identical to yours

A leaseholder took Korax to tribunal to buy their freehold, 



and the terms of the lease were almost identical to yours:




As the lease is almost identical, it's quite possible that Korax started off asking that leaseholder for £1,900.

But the tribunal decided that the cost should be £80.

It sounds like Korax made a complete mess of claiming their legal costs, so the Tribunal took pity on Korax and set their legal fees at £603 + VAT (which the leaseholder had to pay).





So you could make Korax an offer, and point them towards this tribunal decision:

https://www.casemine.com/judgement/uk/627b8bcc342cca483b20dd4c

Lizzog said:

I'd be inclined not to instruct a solicitor to help with this as I know of other people who haven't done so. 

You don't need a solicitor because the process is difficult - it's just signing a few bits of paper.

You need a solicitor because you don't want to end up signing a contract that isn't in your best interests. For example, your solicitor might read the contract and say "The freeholder is trying to pull a fast one. You shouldn't agree to those terms."

Lizzog

Thanks so much.  Funnily enough I also saw that case and had exactly the same thoughts.... will have a look at it now in more detail!

eddddy

Just to explain the options in a little more detail...

Option 1
Korax seem to be saying they will sell you a freehold including their legal fees for £1,900. So perhaps the breakdown is:

• £300 goes to their lawyers
• £1,600 goes to Korax

Option 2
You go to tribunal - the legal fees will be much higher. Maybe...

• £1,000 or £1,200 or more goes to Korax's lawyers, valuers etc
• £80 goes to Korax
• A few hundred extra goes to your lawyer

So the overall cost difference between option 1 and option 2 for you might be quite small - maybe a few hundred pounds either way.

But the difference is huge for Korax £1,600 vs £80.



So, for example, you could try saying to Korax "I'll offer you £700 for the freehold including your legal fees". In that case, maybe...

• £300 goes to their lawyers
• £400 goes to Korax

• (And you save about £1,000)

Lizzog

Thanks- that's very helpful.  Will take time to read and digest it before deciding what to do next.

Lizzog

eddddy said:

Just to explain the options in a little more detail...

Option 1
Korax seem to be saying they will sell you a freehold including their legal fees for £1,900. So perhaps the breakdown is:

• £300 goes to their lawyers
• £1,600 goes to Korax

Option 2
You go to tribunal - the legal fees will be much higher. Maybe...

• £1,000 or £1,200 or more goes to Korax's lawyers, valuers etc
• £80 goes to Korax
• A few hundred extra goes to your lawyer

So the overall cost difference between option 1 and option 2 for you might be quite small - maybe a few hundred pounds either way.

But the difference is huge for Korax £1,600 vs £80.



So, for example, you could try saying to Korax "I'll offer you £700 for the freehold including your legal fees". In that case, maybe...

• £300 goes to their lawyers
• £400 goes to Korax

• (And you save about £1,000)

So I contacted Korax and offered them £700 and got a swift reply back saying that our offer was rejected sadly.  I spoke to someone on the street and they had bought their Freehold from Korax last September for £1,249 and others for similar amounts a few years previous to this.  I then went on the HM Land Registry website and saw that we have a summary of Leasehold AND Freehold against our property - now I am really confused!!  The property description includes our house and 7 other nearby houses.  What is going on!?!?

Lizzog

It also says there is 'no price recorded'.  You only get a price if the land/property was bought after April 2000, more than £100 was paid or stated, HMLR have recorded the price.  Does this mean that potentially someone has already bought the Freehold possibly before 2000???

eddddy

Lizzog said:

So I contacted Korax and offered them £700 and got a swift reply back saying that our offer was rejected sadly.  I spoke to someone on the street and they had bought their Freehold from Korax last September for £1,249 and others for similar amounts a few years previous to this.

Yes - it can be a nice earner for property companies.

The government's statutory formula says a freehold is worth £80.

A property company buys up freeholds in bulk - maybe with a bulk discount - say £50 each. (Maybe that's what Korax does.)

Then they resell them individually at £1000+ each.

People pay a £1000+ for 2 main reasons

• 1) They don't realise they can buy them for £80 through a tribunal

• 2) The legal fees for buying them through tribunal could be £1000+

The leasehold reforms currently going through parliament are supposed to dramatically reduce the amount of legal fees payable. So maybe it's worth waiting to see if that happens.

Lizzog said:

I then went on the HM Land Registry website and saw that we have a summary of Leasehold AND Freehold against our property - now I am really confused!!  The property description includes our house and 7 other nearby houses.  What is going on!?!?

Lizzog said:

It also says there is 'no price recorded'.  You only get a price if the land/property was bought after April 2000, more than £100 was paid or stated, HMLR have recorded the price.  Does this mean that potentially someone has already bought the Freehold possibly before 2000???

I'm not sure what your concern is. Based on what you've said...

• Currently, you own the leasehold title for your house
• Currently, Korax own the freehold title for you house

• You want to buy the freehold title for your house from Korax.
• Then you will own the freehold title and the leasehold title for your house

I think you might be saying that Korax's freehold title covers 8 leasehold houses. So they will split off part of the title.

• You will get the freehold title for just your house
• Korax will keep the freehold title for the other 7 houses

(They might split off other parts of their freehold title, as and when they sell them to other people.)

Lizzog

Ah I see now - yes I will hang on to see what happens re the leasehold reforms.  What is putting me off is the price of the legal fees!