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  • FIRST POST
    • MSE Jenny
    • By MSE Jenny 6th Jul 10, 10:20 AM
    • 1,228Posts
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    MSE Jenny
    The Great ‘lease buying or extending' Hunt
    • #1
    • 6th Jul 10, 10:20 AM
    The Great ‘lease buying or extending' Hunt 6th Jul 10 at 10:20 AM
    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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    Last edited by Former MSE Alana; 06-07-2010 at 10:40 PM.
Page 1
    • Doozergirl
    • By Doozergirl 6th Jul 10, 12:19 PM
    • 26,041 Posts
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    Doozergirl
    • #2
    • 6th Jul 10, 12:19 PM
    • #2
    • 6th Jul 10, 12:19 PM
    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.
  • michaellas
    • #3
    • 7th Jul 10, 8:21 AM
    • #3
    • 7th Jul 10, 8:21 AM
    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.

    Cheers
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  • cazza44
    • #4
    • 7th Jul 10, 11:44 AM
    Lease extending experience
    • #4
    • 7th Jul 10, 11:44 AM
    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
    My husband and I own a flat in a small block of 12 and all of the leases are now running at about 71 years. We approached all the owners and sent them information about buying the freehold and about the issues with short leases, but only 3 were interested and one person even said 'I have another flat and its got 40 years left and its never been an issue for me'. After realising that we just wouldn't get the 6 people needed to get the freehold we had no option but to go down the lease extension route.

    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
    1. Our valuation and 'negotiation' = £450
    2. Freeholders valuation and 'negotiation' = £763
    3. Our solicitor cost = £705
    4. Freeholders solicitor cost = £3055
    5. The premium = £9000
    6. Sundry expenses = £100
    total cost = £14,073

    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!!
    • Mrs Money
    • By Mrs Money 7th Jul 10, 12:13 PM
    • 1,278 Posts
    • 7,188 Thanks
    Mrs Money
    • #5
    • 7th Jul 10, 12:13 PM
    • #5
    • 7th Jul 10, 12:13 PM
    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)
    Originally posted by michaellas
    Think the web address is actually www.rpts.gov.uk - but thanks, may well be useful!
  • mklee
    • #6
    • 7th Jul 10, 12:15 PM
    rpst?
    • #6
    • 7th Jul 10, 12:15 PM
    Thanks Mrs Money! No wonder I couldn't find it!
  • Minorlass
    • #7
    • 7th Jul 10, 12:58 PM
    • #7
    • 7th Jul 10, 12:58 PM
    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.
    • eilidhcatriona
    • By eilidhcatriona 7th Jul 10, 1:13 PM
    • 57 Posts
    • 55 Thanks
    eilidhcatriona
    • #8
    • 7th Jul 10, 1:13 PM
    • #8
    • 7th Jul 10, 1:13 PM
    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.
    • madeupname1
    • By madeupname1 7th Jul 10, 1:34 PM
    • 428 Posts
    • 729 Thanks
    madeupname1
    • #9
    • 7th Jul 10, 1:34 PM
    • #9
    • 7th Jul 10, 1:34 PM
    [QUOTE=cazza44;34492673]
    1. Our valuation and 'negotiation' = £450
    2. Freeholders valuation and 'negotiation' = £763
    3. Our solicitor cost = £705
    4. Freeholders solicitor cost = £3055
    5. The premium = £9000
    6. Sundry expenses = £100
    [QUOTE]

    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.
    • RLH33
    • By RLH33 7th Jul 10, 1:40 PM
    • 357 Posts
    • 342 Thanks
    RLH33
    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.'
    • Mrs Money
    • By Mrs Money 7th Jul 10, 3:07 PM
    • 1,278 Posts
    • 7,188 Thanks
    Mrs Money
    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!
    • ferraria
    • By ferraria 7th Jul 10, 3:29 PM
    • 9 Posts
    • 4 Thanks
    ferraria
    short lease
    You should be ok. I'd speak with a mortgage broker (pretend you're buying a property with a 60 years lease) to check my words, but mine tells me there are a few lenders who are still willing to lend on properties with at least 45 years on the lease. I think the measure is 20 years remaining after you paid off the mortgage (assume 25 years).

    Obviously you'll get lower offers, but there are people out there (like me) who are willing to take the risk to buy a property on a short lease (esp. in sought after areas) cheaply, then extend after a few years.
  • cazza44
    Lease extension calculator
    The lease-advice.org/calc site has lots of info and the link that I would have liked to have added (but can't because I am new) gives a rough estimate to what it believes you should be paying for the premium. I put in the values for the extension we did and its highest estimate was £1000 under what we paid for the premium, so whether it is inaccurate or we were ill advised, I guess I will never know!
    • John_Pierpoint
    • By John_Pierpoint 7th Jul 10, 4:58 PM
    • 8,233 Posts
    • 7,383 Thanks
    John_Pierpoint
    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 respective 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 .......................
    Originally posted by Minorlass
    I have always thought that a terraced house is a much better bet than a flat. Owning your own bit of ground gives a much better balance of rights over obligations. So I have managed to avoid owning a flat, though at one stage I owned the freehold of two flats, with about 20 years of a 99 year lease left.
    [Great fun playing the two tenants off against each other - the new guy, who inherited upstairs and needed something mortgageable to tart it up and sell it - really shot himself in the foot, when he upset the male, female and female teenager living downstairs (not married). By playing one off against the other the value of the freehold went up 20K.]

    However I have recently been a "victim" of the flat with a jointly owned freehold.
    In my case I was selling a house to Mr Smith and Miss Jones; they were setting up home together and financing the purchase in part by selling their two flats.
    Everything seemed to be going well - they had fought off two other potential purchasers and appeared to have buyers lined up for their flats. It was late January and they wanted to move in by Easter - No problem!?

    Then there was that long drawn out period of 10 weeks instead of five, when everything should have been in place and nothing is happening. The seller [me] at the head of the chain, starts doubting his judgement and probably the first time buyers at the bottom of this mini chain are thinking "gazump??".

    In the event we exchanged on a Friday afternoon and completed at about 15:00 on the next Monday ["Sorry you will have to sit in the removal van until I get a call to say the money has been paid"].

    So what was the problem? One of the 4 owners of Mr Jones's freehold had decided to go on the holiday of a life-time, back packing in the mountains. He was completely oblivious to the chaos he was causing as he explored Machu Picchu.

    Thank goodness he had not been struck down with a stroke or simply gone missing like Lord Lucan:

    http://property.timesonline.co.uk/tol/life_and_style/property/article824726.ece

    http://news.bbc.co.uk/1/hi/uk/10243471.stm

    http://wapedia.mobi/en/Feu_duty

    If the freehold is owned by a company, presumably the purchaser of a flat only needs the signature of one director and the company secretary; halving the risk of one of the owners being lost on the Inca trail.


    John

    PS If one wants to get rid of a troublesome secured tenant, is it still possible to buy a very short lease property and then persuade (bribe) the tenant to move there?
    Last edited by John_Pierpoint; 07-07-2010 at 5:23 PM.
    • scotbruce
    • By scotbruce 7th Jul 10, 7:47 PM
    • 23 Posts
    • 11 Thanks
    scotbruce
    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.
    Originally posted by eilidhcatriona
    Exactly - article amendment required, please.
  • fallgirl
    I would never buy a leasehold again but people are not always in a position to choose. The buying and selling process is more expensive because of the lease. I extended the lease but this took a painfully long time because I had a useless solicitor who was not chasing up the freeholder's equally useless solicitor. They were getting paid the same (by me) regardless of delays. I felt quite powerless and felt that the lease extension was a form of blackmail "£10,000 or you cannot move". The CARL website was a great source of sanity but a change in the law is long overdue.
    Last edited by fallgirl; 10-07-2010 at 9:23 PM.
  • adh983
    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!
    Originally posted by Mrs Money
    From my experience of living in a block of flats and working for a managing agent company in the past, any lease less then approx 70 years is going to be very difficult to sell the property or get a mortgage with good rates.
    buying the freehold needs at least 50% of the leaseholders who can then force the freeholder to sell, you then as freeholders will be able to charge the leaseholders who did not join in when they want to renew their leases, however it is a very expensive process, especially if you only have half the leaseholders. Alot or mortgage companies will let you add the cost of purchasing it to the mortgage as they see it as added value to the property.
    to renew the lease is also expensive as the purchaser needs to pay all the freeholders costs, however once the lease is extended you do not have to pay ground round anymore.
    • Doozergirl
    • By Doozergirl 7th Jul 10, 9:32 PM
    • 26,041 Posts
    • 70,345 Thanks
    Doozergirl
    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!
    Originally posted by Mrs Money
    You have mentioned that 'the residents own management company' have stated that it only costs a few hundred pounds in which case it might be that they have already purchased the freehold collectively? It might be that it costs only the legal fees associated if there is already a share of freehold involved.

    If it is just a few hundred pounds then great, but if it is a true leasehoold flat and the freeholders want full value, then there isn't a chance that it would cost a few hundred pounds. As already suggested, use the calculator on the LEASE website to get an idea of the lease extension cost.

    Ultimately, the flat will be devalued by around the cost of extending the lease and quite possibly more if it ends up as an auction property. To save losing more than you need to, if you can get agreement on the extension and it is indeed expensive then it is possible to sell the flat for a price with lease extension included and complete on the extension at the same time as the flat itself, using the buyer's money to pay for it, iyswim. Your solicitor will administer that for you.

    Many mortgage lenders don't lend below 70 years although it used to be the case that some would offer mortgages on leases where the number of years left totals more than (30 + the term of the mortgage) eg. 25 year mortgage plus 30 years = you can borrow on a 55 year lease. Not sure if those are still available post credit crunch!
    Everything that is supposed to be in heaven is already here on earth.
    • pollyhelen
    • By pollyhelen 7th Jul 10, 10:11 PM
    • 50 Posts
    • 20 Thanks
    pollyhelen
    Hello

    We just had annoying leasehold experience with a house. First time buyers, property looked too good to be true... it was.. it didnt say anything on the particulars and we were too green to notice, and so we had offer accepted - last week this is, and then discovered "incidently" from the EA when we were completing our mortgage application. 65 years to run, our solicitor told us to run too because of the nature of the charitable estate who owns the freehold. Mortgage guy said no good deals coming up for this sort of request. Turns out another buyer had already found out and pulled out, and the vendor did a poor show of feigning surprise, and then actually knowing lots of detail. If only he had been upfront. We've been quoted up to £10k, and we were already at the top of our budget, so we have withdrawn the offer and said come back when you've sorted it.. and started looking elsewhere.

    now we know!
    Debt free March 2010
    Focussing on babies and paying off the mortgage!
    • symesd
    • By symesd 7th Jul 10, 10:36 PM
    • 121 Posts
    • 90 Thanks
    symesd
    Freehold Question
    I have a property which is already FREEHOLD and was wondering if you are able to sell the freehold if you are living in the property and have a mortgage, and if yes what could you sell it for and who/how would you sell to or go about it...

    I ask this as I have some debts and wondering if it would be possible & would it be enough to pay off my debts.

    Thanks
    Debt £34,800 - Dec 2012
    Debt £12,500 (Dec 2015)
    Current Debt £6,435 (Nov 2017)
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