Buying share of freehold / Extending lease -- is this reasonable?

JimDuggan91

Hello all,

We are in the process of buying a leasehold flat for around £110,000.
The flat has 104 years remaining.
Ground rent is £100 a year.

We wanted to own a Share of Freehold and extend the lease at the same time, and after paying a £130 fee for a "lease extension quote", they came back with this:

"We are prepared to offer a lease extension on the following terms.
1) New 990 year lease from the date of completion.
2) Ground rent adjusted to peppercorn.
3) Pay our premium of £7000
4) Pay our solicitors fees of approx 1300 + VAT."

Do you think that this is a reasonable amount to pay? I know that there may be new legislation soon that makes it easier to buy the freehold, but I'm unsure how that will work.

Thank you all for your time and help.

NervyBuyer

Commenting purely on the lease extension element, the premium sounds a little expensive (have you had a look at https://www.lease-advice.org/calculator/?) but the fees not too bad. You could counter offer with a lower premium perhaps? With 104 years remaining I would be tempted to wait a bit and see how the new legislation takes shape. 

Does the ground rent go up or is it fixed at £100 pa?

Why would you want to extend the lease at this stage if you're buying a share of the freehold - you'd be able to organise that later with the other freeholders wouldn't you?

eddddy

• A lease extension calculator estimates that you should pay £2k to £3k for a statutory lease extension (assuming that, currently, the ground rent is fixed at £100 for 104 years).

• But a Statutory Lease Extension adds 90 years to your lease (making 194 years) - it doesn't extend it to 990 years.

• Extending from 194 years to 990 years should cost an extra £1k  (or less)

• So £7k seems expensive. £3k to £4k would be a fairer price

• See: https://www.lease-advice.org/calculator/

But, currently, ... your legal costs for a Statutory Lease Extension might be around £2k extra

With 104 years still left on the lease, you could buy without the lease extension, and wait to see what happens with the new legislation.

If you decide to go with the freeholders current offer, I would suggest you instruct a solicitor who specialises in Lease Extensions to check over everything. 


(As an aside, based on your post it sounds like you may not understand how 'Share of Freehold' works. You can't really ask a freeholder to sell you a 'Share of Freehold'.)

BonaDea

If you and the other leaseholders all buy the freehold (which is what you'd have to do: as @eddddy says, you can't buy just a share of it), then you could grant yourselves leases of any length you choose without paying the freeholder's premium since, obviously, you'd just be paying yourselves.  You'd only have legal fees to pay.

JimDuggan91

Thank you all for your helpful advice, and apologies for the delay in replying.

It was pointed out more than once above that I've not understood how buying a share of freehold works. You are all absolutely correct, it seems I had gotten mixed up.

This is just for the lease extension. I guess I will have to think about buying a share of freehold once I discuss with other leaseholders some point in the future.

I went back to them and offered 3.5k.
They rejected this outright.

I guess I will just have to buy as is, and then see what the new legislation says in the future, hopefully it makes it easier and/or cheaper to extend the lease.

Thank you all again for your sterling advice.