Appointment of managing agents

[PDW1964]

Hi everyone. I wonder if someone could advise me please?
I own 2 leasehold flats in a converted house. There are only 2 flats in total but I do not own any of the freehold. I have just been informed by the freeholder (a property company based miles away) that they intend to appoint a management agent. I would rather this doesn't happen as I believe it will result in unnecessary expense for me. In the past, the freeholder has been happy for me to do all maintenance myself and not get involved. There is provision in the lease for the freeholder to add a 10% fee to any expenses submitted for payment to the service charge fund. However, I never submit these invoices as the total service charge fund is payable by me. This system has run very well for years. I note that one of the directors of the management company is also the freeholders son. Would i be within my rights to apply for an RTM?
Many thanks

[Macromia]

Yes, as long as you meet the requirements for RTM (which you would seem to, assuming you hold qualifying long leases), it sounds like RTM might be appropriate.

Alternatively, and possibly a better option in your case, you could consider buying the freehold.

[PDW1964]

Hi Macromia.Thanks for your reply. I believe the leases qualify for an RTM. I have also made enquiries before about buying the freehold but their original estimate seemed way too high IMHO. They suggested getting their valuers to value it (which I incidentally would have to pay for apparently) and go from there. My problem is that I would have to pay for the valuation but with no guarantee that they would agree to it and I would have wasted my money!

[Macromia]

My problem is that I would have to pay for the valuation but with no guarantee that they would agree to it and I would have wasted my money!

There is legislation in place that allows leaseholders to forcibly buy the freehold of buildings in which the have leasehold properties.

You will have to pay the reasonable costs of the current freeholder, including surveyors and solicitors fees, but you can get a tribunal to determine both the reasonable costs and the price for the freehold if you can't come to an agreement.
In your case, unless the ground rent is high, or the leases are very short, I wouldn't expect the freehold to be worth a large amount.

[PDW1964]

Hi and thanks again. I must admit that I didn't think there was a right to buy the freehold! The ground rents are fairly high in my opinion ie £270pa for the ground floor flat and £400pa for the maisonette so I guess this increases the value of the freehold

[chris1544]

We are in the same situation as you in terms of being the only two flats in a converted house. We have started the RTM process as an interim before possibly proceeding to buy the freehold later on. Our ground rents aren't as high as yours though.

If you decide to apply for RTM, note that the law says that 50% of the flats in the building must participate but in the case where there is only two flats, both must be involved.

[PDW1964]

Hi Chris. I was wondering what would be the point of incurring the costs of setting up an RTM and then buying the freehold just after? Why not start freehold valuation/negotiations straight away?

[chris1544]

It'll be a few years until we will be able to afford to buy the freehold. In the meantime RTM allows us to take control of the service charges.

If you can afford to buy the freehold together from the start then yes you are much better off doing that and doing RTM first wouldn't be worthwhile.

[eagle2]

RTM is a good move; when the freeholder has no other influence, he is likely to be more receptive to selling and at that stage you could test him with an offer.

[PDW1964]

I have loosely discussed an RTM with the freeholder before and he told me it would not be worth it as I would have to pay his legal costs associated with replying to the necessary correspondence. Surely these can't amount to much and must also be reasonable? I also think he is underestimating the amount I could save on the annual insurance (which I calculate to be around £500 pa). I got the impression he was trying to warn me off in a veiled kind of way by suggesting his legal costs would be large!

[Tipper]

A RTM has legal rights to freeholders/agents accounts and records and more importantly any funds held on account including 'sinking funds' that may have been built up. Therefore RTM first, get all the documents and cash transferred and then buy the freehold.

[Gordon999]

Hi and thanks again. I must admit that I didn't think there was a right to buy the freehold! The ground rents are fairly high in my opinion ie £270pa for the ground floor flat and £400pa for the maisonette so I guess this increases the value of the freehold

How many years unexpired remaining on the lease ? You are currently paying £670 p.a in ground rent. When does the ground rent increase ?

Are you willing to make an offer to freeholder to buy the freehold title at say, 20 x £670 = £13,400 ?

You could save £670 pa ground rent plus £500 insurance = £1170 p.a and recover the cost of buying the freehold over 11.5 years.

[leaseholder64]

In my experience, quality products, from different suppliers, are priced pretty closely. If you are getting much lower insurance quotes, are you sure you are really getting the same cover?

[eagle2]

There was another thread recently on here where the insurance premium was reduced substantially for the same cover by the same insurer so it is worth taking into account when considering whether or not to purchase the freehold.