Collective Enfranchisement and the alternatives…

hotandsunnyplease

Hello

I’m struggling to find clarity on some specific elements of purchasing a freehold in my situation, and I’m  wondering if the MSE forum wise owls can help. 

I own a leasehold property in a building that was converted into two homes in the 80s. The other leaseholder and I were hoping to purchase the freehold via collective enfranchisement. We made an informal request to the freeholder (a big ground rents type company) and they made us an offer that was about £30k, but the valuation from our surveyor is closer to £18k. Of that valuation, £17k is for the other leaseholder (she has a shorter lease of about 85 years, higher ground rent etc). She cannot afford to proceed at the moment at that amount, and and has suggested we set up an RTM instead in the short/medium term. Which certainly helps with one of the frustrations of the freeholder and management company we’ve inherited! However I am very keen to obtain the freehold for several other reasons - it sorts out quite a few niggles that would come up in resale (and I would like to sell in next year or two)… and theoretically I can afford to pay the whole sum, or split the bill. I think splitting the bill would be okay in terms of value added to my resale (pretty generous perhaps given that my part of the valuation is so small, but it definitely would add a bit to my sale price). If I were to foot the whole cost I think I would need either an agreement for repayment over time and/or maybe unevenly weighted shareholding if we set up as a company - is that a thing?. Are these routes often taken/easily achieved? I haven’t discussed with my neighbour yet as I don’t want to overwhelm! If she decides she doesn’t want to do it at all any more, is it possible for me to try to do a deal with the current freeholder where they use Section 5 and then just sell entire freehold to just one leaseholder? I think the rules are a bit different in our case when there are two properties in one building… but I might be wrong. I’m just not sure what’s allowed and what isn’t.. 

Looking for the best route through! Any knowledge gratefully received. 

Thanks 🙏 hotandsunny 

eddddy

hotandsunnyplease said:

the valuation from our surveyor is closer to £18k. Of that valuation, £17k is for the other leaseholder (she has a shorter lease of about 85 years, higher ground rent etc).

The £1k vs £17k valuation almost certainly assumes that you will scrap ground rent, and extend both leases to 999 years.

So other 'fair' options could be:
 

• You pay £9k each for 50% shares. But you don't scrap ground rent or do lease extensions. Instead, your neighbour pays you 50% of the ground rent per year, and you charge her 50% of the normal price when she wants to extend her lease.

• You pay £18k for 100% share (you neighbour signs the docs to allow this to happen). But you don't scrap ground rent or do lease extensions. Instead, your neighbour pays you 100% of the ground rent per year, and you charge her 100% of the normal price when she wants to extend her lease.