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MSE_Jenny
Posts: 1,312 MSE Staff
The Great ‘lease buying or extending' Hunt
Unique to the UK, the leasehold system means you can buy a flat while someone else owns the freehold, so you get charged to extend the lease and for maintenance. We're writing a guide to extending leases and buying freeholds and want to hear your top tips, problems and experiences to help other MoneySavers.Hit reply to give us your thoughts.
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I think that a lot of people probably aren't aware of the Leaseholders Right to Manage. Lots of people buy their freehold in order to avoid profiteering Managing Agents, but the management of a block can be legally taken from the hands of the freeholder at a much lesser cost - very cheaply indeed if you DIY or for a £100 or so per flat using an agent to do it for you. Legal fees alone for the collective purchase will cost more than that...
Where blocks are relatively new with long leases (100-125 years), lease extensions aren't necessary or important as they won't benefit the leaseholder for decades - so in cases like these it is cheaper and more MSE to take the RTM than it would to buy the freehold.
On the other hand, where leases are quite short, less than 70 years, is can be cheaper to buy the freehold collectively than it is to extend a lease!
Do not buy the freehold or take the RTM as a block if you aren't prepared to do the admin associated with running a company yourself. It is a commitment that has to be made - if you simply ignore maintenance or try to run it on an ad-hoc basis, you can render the flats in a block unmortgageable and drastically reduce the value of an otherwise sound flat. When you sell on, a buyer's solicitor will expect to see evidence that the block is being run professionally if the terms of the lease dictate that.
If you are negotiating a lease extension or buying the freehold then it's always worth having your own valuation carried out to check that the freeholder's quote is a sensible one. Desktop valuations can be obtained cheaper than physical survey-based ones.
And don't be afraid to haggle once you've been presented with the price!
Fabulous advice and lots of information available from the Leasehold Advisory Service , of course. They have a telephone number where you can get free advice as well as reams of information on their website.
http://www.lease-advice.org.uk/Everything that is supposed to be in heaven is already here on earth.
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If you are trying to extend the lease or collectively buy the freehold & feel you are being ripped off try this website
WWW dot RPST dot GOV dot UK
(where it says "dot" place a . - the website wouldnt allow me to add the link)
It`s a service provided by the government, haven`t used it however have a look @ what they can do for you.
I would say with all the changes with the civil servants & cost cutting etc this may be another service offered to the public that could be axed.
CheersVirgin - £3,350
Slimming World - lbs0 -
We extended a lease on a flat at the end of april 2010.
- Its a long process.
- Don't be suprised at the apathy or ignorance of other owners in the block.
- It costs a lot of money to extend a lease...and I am not just talking about the premium I am talking about the associated 'professional' fees
- As far as I am aware you get no choice of valuer or solicitor that the freeholder uses...this is important because they have no incentive not to use the most expensive in both fields...all of which you have to pay for :mad:
The lease extension process in all probably took 10 months, from initially getting the quotes from 3 different valuers (for our valuation) and 3 different quotes from solicitors, we went for a fixed fee that didn't include going to the Leasehold Valuation Tribunal should that be required.
Our feeling was that the freeholders solicitor did no more (they probably did less in actual fact) than our solicitor and yet they wanted to charge nearly 5 times as much as our solicitor (we got £250 knocked off their original fee).
Our costs (including vat) on a 1 bed flat valued at £135k were- Our valuation and 'negotiation' = £450
- Freeholders valuation and 'negotiation' = £763
- Our solicitor cost = £705
- Freeholders solicitor cost = £3055
- The premium = £9000
- Sundry expenses = £100
I know that someone will probably say 'well you could go to the LVT' to dispute the costs and get the solicitors fees reduced to £1000, but the reality of this when you phone all the advisory services is that they do not recommend that you turn up to the LVT without the services of a solicitor...and we asked the cost of the solicitor for doing this and it was a minimum of £1600 which meant that we would only be spending £400 less and who cares which solicitor gets more money when you have to pay both anyway! We decided that for the extra inconvenience and other expenses that we might incur it wasn't worth it.
It seems totally unfair and there is only one set of people that seemingly win out of a lease extension...and they are the solicitors.
Also the 'premium' is the only thing that is taken into account when estate agents/valuers look at the difference in price to the flat and we were naive about how much the professional fees would be, so if you are looking to buy a flat with a short lease beware!!0 -
michaellas wrote: »If you are trying to extend the lease or collectively buy the freehold & feel you are being ripped off try this website
WWW dot RPST dot GOV dot UK
(where it says "dot" place a . - the website wouldnt allow me to add the link)
Think the web address is actually www.rpts.gov.uk - but thanks, may well be useful!0 -
Thanks Mrs Money! No wonder I couldn't find it!0
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I and three neighbours purchased the freehold of our flats a number of years ago. Over the years there have been a few issues to contend with which revolve around neighbour relations and wanting to extend the lease term. We have a shared freehold so we each own 25%.
Nobody wanted to go down the forming a management company route, posting accounts etc, hence the shared freehold route. We all look after our repspective properties and have joint responsibilities as well. All sounds good? NO, the relationship between you all is so critical and with even legal agreements in place we have one party that won't sign any papers to extend the lease and there we have a stumbling block for the future. Whilst we all seem content to stay where we are for the time being, there will come a time when someone wants to sell and move on. The value of the property may reduce with a short lease term left and probably a mortgage company won't lend on a short lease either.
Ensure you have dispute resolution in place.
Even with dispute resolution in place, what are the chances you can afford the legal costs to resolve it?
Generally, building insurance has to be organised as a block policy between you all. Be prepared to act as a contact, and ensure your insurance company writes to all parties to ensure payment is made by all in equal chunks. If a party doesn't pay and the dispute resolution kicks in and you still can't resolve it, you can put a charge on the property but beware of the legal costs to do so they may outway the cost of the insurance.
Keep the shared freehold portion tied to the lease so that it can't be sold on to another party.
Don't underestimate apathy of the other owners, they go so far but don't want to do much else!
In a shared freehold system the person who sells pays all the legal costs of the other parties in the block as well, so factor that into your costs.
Set your own sinking fund up to deal with repairs etc and any shared responsibilities. Don't think your neighbours will behave the same as you, some will try and get out of their shared responsibilities.
There is loads more to deal with on this subject, just a few pointers from someone who has lived through it with only a few minor issues to date however, I'm bracing myself for headaches and costs when one of us wants to move.
Dont' let the above put you off. Research, get recommendations from other management companies, references etc.0 -
A small point - you state it is "unique to the UK". Perhaps, but that implies it is the system in the whole of the UK. Scotland however has a much more straightforward system so you might be better to discuss this as being in England and Wales.0
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- Our valuation and 'negotiation' = £450
- Freeholders valuation and 'negotiation' = £763
- Our solicitor cost = £705
- Freeholders solicitor cost = £3055
- The premium = £9000
- Sundry expenses = £100
If you have a mortgage, your mortgage provider may also charge a fee of several hundred pounds for agreeing to the extension. I think they chalk it up as solicitors fees. Mine did.0 -
I don't have any tips but it is worth highlighting in your guide that leasehold does not only apply to flats but to houses as well.
Furthermore Crown Land is apparently exempt. My parents live in a cottage with 70 odd years remaining on their lease but whose freeholder is the Duchy of Cornwall. In researching how to buy their freehold or extend the lease there is very little information on what you do if your freeholder is the Crown. I had to e-mail the Leasehold Advice Centre who sent me the following message:
'Crown land is exempt from the statutory requirements for a landlord to provide a lease extension or sell the freehold. However the Crown has stated that they will issue lease extensions and grant the right to purchase the freehold in accordance with the provisions of the Leasehold reform Housing and Urban Development Act 1993.'0 -
Does anyone have any ideas about the difficulty of selling a flat in a 1960s block with around 60 years left on the lease? Is it a complete non-starter?
My DH will inherit his father's flat when the estate is settled and the residents own management company are pushing him to extend the lease, saying it will "only cost a few hundred pounds". Looking at other info on here - I'm a bit shocked that the cost is likely to be much, much higher.
DH, as executor, only wants to sell the flat and be shot of it, because the money has to be divided up amongst the beneficiaries of the will, so the more we spend now the less there is for everyone - how on earth do we make the right decision?
Will it be a case of if we don't spend on the lease - then we can't get much for the flat? Or perhaps we won't be able to sell it at all!0
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