After enfranchisement, do we need Lease extensions?

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    After enfranchisement, do we need Lease extensions?

    Here's another one for you - apologies if I'm being thick... If we manage to purchase the freehold of the 10 flats where only 50% of qualifying tenants participate, is there any point in rewriting the leases of those participating (to 999 years or whatever)? If they have a share of the freehold (presumably by being shareholders in the freehold holding company which we will be setting up), does the lease matter anymore? When it get down to zero, it defaults to the freeholder/themselves anyway.
    Thanks anyone!

    #2
    Originally posted by CoSec5 View Post
    Here's another one for you - apologies if I'm being thick... If we manage to purchase the freehold of the 10 flats where only 50% of qualifying tenants participate, is there any point in rewriting the leases of those participating (to 999 years or whatever)? If they have a share of the freehold (presumably by being shareholders in the freehold holding company which we will be setting up), does the lease matter anymore? When it get down to zero, it defaults to the freeholder/themselves anyway.
    Thanks anyone!
    1. Leases should definitely be extended asap.
    2. Whilst what you say is literally true, a lessee can sell or mortgage only what the lessee personally owns- ie the leasehold. It's no good stating that lessee also has a shared f/r; one cannot personally sell or mortgage it.
    3. For those who have forked out to buy f/r collectively, they should all now grant extended terms (ie Deed of Surrender and Re-grant) for 999yrs.
    4. For those who have not forked out, the "forkers" have effectively paid extra. The non-forkers are not only remaining as lessees but they- or successors as lessees- will eventually have to pay up and extend what would otherwise be unsaleable/unmortgageable leases. They will certainly have to pay much more than the forkers have paid, and the premium on each subsequent extension will be divided amongst the forkers.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

    Comment


      #3
      New technicla term for those who contribute a collective freehold purchase!

      forkers
      What a wonderful piece of shorthand, Jeffrey! Much shorter then "those who have contributed towards the purchase of the freehold...!"

      We can use expressions on these forums we could never use when writing explanatory letters to clients. It's so refreshing! Or maybe in uttermost Netheredge you can get away with it when writing to clients... I wish I could...

      O hdear I got the heading wrong - "technicla term" - can't edit that though!
      Last edited by Richard Webster; 14-05-2007, 16:32 PM. Reason: typo in heading!
      RICHARD WEBSTER

      As a conveyancing solicitor I believe the information given in the post to be useful (provided it relates to property in England & Wales) but I accept no liability except to fee-paying clients.

      Comment


        #4
        "Non-forkers" equals "spongers"; short arms not reaching pockets.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


          #5
          Forkers vs Spongers

          Hello again. Once more I'm wearing my very amateur Company Secretary hat and would like to pursue this trail - Forkers vs Spongers.
          Forkers: Those who have contributed towards the purchase of the freehold.
          Spongers: A little unfair - just say those who were unable to participate at the time.

          Assuming my 50% of forkers have forked and the freehold now belongs to the company they have set up (or probably it will be me who does all that), is it essential for the forker to relinquish his interest in the company when he moves out. I can't see any reason why he should since the rewritten lease is what is being bought and sold and the company (limited by guarantee I gather?) is a separate entity ("the freeholder"). It's just that a forker making an early move will not benefit from the payback in the future when the non-forkers have to cough up. OR, does one assume that they will receive so much more for their property with its 999 year lease when they move that they will have been "paid back" already.

          Apologies if all this sounds a bit daft - I promise that I will be appointing a solicitor very shortly to carry us through the quagmire. I just want to sound as if I have more than one brain cell when I talk to him/her.
          Cheers,
          Jenny (CoSec5)

          Comment


            #6
            Originally posted by CoSec5 View Post
            Hello again. Once more I'm wearing my very amateur Company Secretary hat and would like to pursue this trail - Forkers vs Spongers.
            Forkers: Those who have contributed towards the purchase of the freehold.
            Spongers: A little unfair - just say those who were unable to participate at the time.

            Assuming my 50% of forkers have forked and the freehold now belongs to the company they have set up (or probably it will be me who does all that), is it essential for the forker to relinquish his interest in the company when he moves out. I can't see any reason why he should since the rewritten lease is what is being bought and sold and the company (limited by guarantee I gather?) is a separate entity ("the freeholder"). It's just that a forker making an early move will not benefit from the payback in the future when the non-forkers have to cough up. OR, does one assume that they will receive so much more for their property with its 999 year lease when they move that they will have been "paid back" already.

            Apologies if all this sounds a bit daft - I promise that I will be appointing a solicitor very shortly to carry us through the quagmire. I just want to sound as if I have more than one brain cell when I talk to him/her.
            Cheers,
            Jenny (CoSec5)
            Yes- the paying lessee's membership of co. should end when he/she ceases to be a lessee. The cost of what was paid ought to be reflected in higher flat value on sale "with share of freehold" (as it's colloquially expressed).
            JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
            1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
            2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
            3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
            4. *- Contact info: click on my name (blue-highlight link).

            Comment


              #7
              Darn it. I thought it would be a good wheeze for my retirement.

              Comment


                #8
                As I can't apparently send pm to you, please send one to me if you need professional assistance in rewriting leases.
                JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                4. *- Contact info: click on my name (blue-highlight link).

                Comment


                  #9
                  Originally posted by jeffrey View Post
                  As I can't apparently send pm to you, please send one to me if you need professional assistance in rewriting leases.
                  Sorry Jeffrey, I hadn't realised.
                  I have now changed my profile to include pm - I always thought that my left side looked better than my right anyway.

                  Comment


                    #10
                    Traps for the Unwary - they should have asked Jeffrey

                    Originally posted by jeffrey View Post
                    1. Leases should definitely be extended asap.
                    2. Whilst what you say is literally true, a lessee can sell or mortgage only what the lessee personally owns- ie the leasehold. It's no good stating that lessee also has a shared f/r; one cannot personally sell or mortgage it.
                    3. For those who have forked out to buy f/r collectively, they should all now grant extended terms (ie Deed of Surrender and Re-grant) for 999yrs.......
                    I just had to come back to this one - we are the 10 leaseholders hoping to buy the freehold. One of the leaseholders has a friend in another local block of 12 flats. They bought their freehold about 3 years ago but didn't do the lease extensions. Now 2 of the flatowners are hoping to sell but are unable to do so because although they have "share of the freehold" this does not count as per Jeffrey's No 2. comment above.
                    The CoSec of their management company is now saying that they will each

                    Comment


                      #11
                      Cosec,

                      In the block belonging to your fellow leaseholder's friend, those leaseholders who have participated in collective purchase of their freehold should propose a resolution to the freehold company ( NOT the managment company ) that all members shall be granted a free lease entension to 999yrs at NIL ground rent, charged only on an equal share of the legal costs. Obviously those leaseholders who have not paid for a share of the freehold company and are not members of the company will not get this benefit.

                      It does not make economic sense for a "leaseholders owned" freehold compony to charge its members a "premium for granting lease extension" as the proceeds are taxed before it is paid back to members as dividend. ( It becomes a tax on your own money). The main purpose of buying a share of the freehold is to gain the powers of the freeholder and use it for the benefit of its members. Usually flats sold with a share of the freehold (SOF) should get a higher price because there is no ground rent to pay and no outsider freehold company to cause problems etc.

                      In your own block , all leaseholders should be encouraged /educated to participate as those who do will increase the value of their flat by posibly
                      20K+ as in a future sale they will be able to offer their flat on 999year leases at Nil ground rent. The leasehold system is based on contracts which are unfair because the at the end of the lease term, the leaseholder's premium is wiped out.

                      If you want to negotiate the price, then you should look at the accounts of the freehold company. The interest rates are going up and you should look to see if their company ground rent income covers their existing bank loan interest, if any. It will give you a clue as to whether you can start at 50K offer level. Also you should check from Land Registry what price was paid at the last transfer of the freehold. In your offer letter, you can tell them how much profit they will get. If you have been over charged on building insurance , you can demand the full details of what commissions have been taken without the approval of the leaseholders.

                      If your RTM has no assets,there is little risk of losing control of the building managment rights.

                      If the sale does go to auction, then I would suggest that you write a letter to the auction company's ( placed in despatch box ) to clarify that the block is managed by the RTM company ( controlled by the leaseholders) and the freehold is only entitled to the ground rent income. Also point out that that the leaseholders are interested in buying the freehold and will be campaigning to convert their block to Commonhold as soon as conditions permit . It will discourage excessive bidding at the auction.

                      Having said this , you still need to follow Jeffrey's advice and get a valuation from a surveyor ( or even from sglacy who is an expert in this area and frequently comments in this forum ).

                      Comment


                        #12

                        Comment


                          #13
                          I just wonder if the freehold company members had a meeting to vote on cancellation of ground rent and extension of lease to 999years and had this decision recorded by a minutes of meeting which a solicitor could register at Land Registry against every leasehold property title would suffice. ?????

                          Comment


                            #14
                            Originally posted by tenant29 View Post
                            I just wonder if the freehold company members had a meeting to vote on cancellation of ground rent and extension of lease to 999years and had this decision recorded by a minutes of meeting which a solicitor could register at Land Registry against every leasehold property title would suffice. ?????
                            No it wouldn't.
                            Only legal title is substantively registrable. One cannot informally abolish a ground rent or magic a leasehold extension; you need a Deed.
                            And, yes- they should have asked Jeffrey!
                            JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                            1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                            2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                            3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                            4. *- Contact info: click on my name (blue-highlight link).

                            Comment

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