Freeholder worst-case on a leasehold house

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    Freeholder worst-case on a leasehold house

    I should be grateful for your thoughts please. The ground rent was £10 per half year, with no provision for increase. The lease is for 999 years from 1970. The landlord is a notorious ground-rent company.

    The lease states "Not at any time hereafter without the consent of the Lessors first obtained to alter or permit to be altered the external plans or elevations of the said dwellinghouse erected on the said plot of land hereby demised."

    There is no "consent not unreasonably to be withheld clause".

    If the leaseholder wants to extend his house (considerably), what is the worst the landlord could reasonably request? An increase of the ground rent to £350 per annum plus 50% of the increase in value of the house? More? Less?

    The house is worth about £750,000, the additional works will be £200,000 and the house will be worth £1,150,000 at the end of the process - i.e. a £200k profit.

    #2
    I think lessee would be silly to do that. They should buy the freehold, and then extend.

    Comment


      #3
      Thanks. Does the lessee have a statutory right to buy the freehold? Ah, yes he does. What will a reasonable cost be?

      Comment


        #4
        Originally posted by Telometer View Post
        There is no "consent not unreasonably to be withheld clause".
        It is implied by section 19(2) of the Landlord and Tenant Act 1927:

        In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the making of improvements without a licence or consent, such covenant condition or agreement shall be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that such licence or consent is not to be unreasonably withheld; but this proviso does not preclude the right to require as a condition of such licence or consent the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and of any legal or other expenses properly incurred in connection with such licence or consent nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the tenant to reinstate the premises in the condition in which they were before the improvement was executed.

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          #5
          Originally posted by Telometer View Post
          Thanks. Does the lessee have a statutory right to buy the freehold? Ah, yes he does. What will a reasonable cost be?
          Between ten & twenty times ground rent plus legal fees used to be considered reasonable. Since the freehold grazers cottoned on, it could be anything. Presumably though you could apply to the FTT if quoted something unreasonable.

          Comment


            #6
            Thanks. So if I've read the Act correctly there's a 2-year period of residence required before the leaseholder can apply to buy the freehold? And at that point the FTT will presumably grant a low price. But if the leaseholder wants to start his works before then he has to come up with rather more. What if the leaseholder does the works anyway, and then waits until the two years are up and buys the freehold. Can the now ex-freeholder then still come after his former leaseholder for the breach in the lease terms in the earlier period?

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              #7
              Originally posted by Telometer View Post
              . What if the leaseholder does the works anyway, and then waits until the two years are up and buys the freehold.
              You really don't want to do that. Freeloader will then be able to ask whatever he wants to overlook the breach before he will sell.

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                #8
                Thank you. And what's the worst-case scenario for buying the freehold. Two more years on top of the two year wait if they really drag their feet?

                How long does it take to get through the FTT?

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                  #9
                  Depends how badly you want to extend I guess. Either pay what the beggars ask now, or wait two years and apply to the FTT. Why don't you ask for a purchase price to proceed now outside the act? At least that will give you something to work with.

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                    #10
                    I was just wondering how long the FTT process would take, in order to be able to evaluate the value of an offered price at this stage. Do you start the legal process with the courts the day the two year period begins, or is that the day you start the process of negotiation with the Landlord (assuming that the prior process stalled with it being silly money)? Thanks

                    Comment


                      #11
                      The FTT have set the cost for freehold title for leasehold house with 999 years lease and low ground rent at around 18 x the annual ground rent. + legal costs.

                      So based on your annual payment of £10 x 2 per year = £20. giving estimated cost at £360 + legal costs. So instead of waiting 2 years , you could make an offer at £500 + legal expenses for freeholder's costs. .

                      Comment


                        #12
                        But if I want to get building immediately - rather than waiting two years - the freeholder knows that I will pay *significantly* more than that. There's 200k to spend to make the ideal house, plus the benefit of not living in a house that hasn't been touched since 1970.

                        So the crucial question is how long will the process at the FTT take? Is it two years I'd have to wait, or more like three or four years?

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                          #13
                          There is no simple answer, the freeholder can delay the process and it can take more than a year quite easily and I would not be surprised if it extended to 2 or more years. Is the freeholder aware of your plans?

                          Comment


                            #14
                            Where is your location for application to nearest FTT ? If you can apply to Manchester or Cambridge instead of London, it may be much quicker for getting a decision from FTT .

                            Ask if you can get a quicker decision., say 3 - 4 months for the hearing and 6 months for decision ??

                            Comment


                              #15
                              Thanks. I have not contacted them. But just to make it clear that it is quite possible that the FTT process - commencing two years after acquisition of the property - is quite likely to take two or possibly more years? At which point paying them "quite a lot" for the privilege does not seem like a bad idea at all.

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