Offer to purchase head lease

[lek28]

Hi there

I own long leasehold of a flat and the two other long leaseholders in the building and I were recently served a notice with an offer to purchase the head lease from the immediate landlord for £9,900.

As far as I am aware, our immediate landlord is a limited company whose only activity is owning the head lease. Any idea why this entity might be selling the headlease?

What should I be thinking about in considering whether to accept the offer?

Thanks very much

[sgclacy]

Your head lease will receive your ground rent and out of that pays a ground rent to the freeholder . The difference between the two is his profit assuming the ground rent he pays to the freehold Is less than he receives

[lek28]

Thanks for that. I've checked the headlease, and rather than being defined as any set amount, the Ground Rent due to the ultimate landlord is defined as "the ground rents received from time to time by the Tenant from the tenants of the Residential Unit Leases"

I wonder, do you think it means that if we purchased the headlease, we could amend our leases to reduce the ground rent?

[Tipper]

I believe that if you buy the freehold collectively instead then the head lease 'disappears'.

You still remain leaseholders but you will own the freehold through shares in a freehold company and can decide your own destiny.

[sgclacy]

Thanks for that. I've checked the headlease, and rather than being defined as any set amount, the Ground Rent due to the ultimate landlord is defined as "the ground rents received from time to time by the Tenant from the tenants of the Residential Unit Leases"

I wonder, do you think it means that if we purchased the headlease, we could amend our leases to reduce the ground rent?

In which case the net rent receivable by the head lessor is nil. So unless the term of your lease is short and the head lessors lease is very long ( i.e. making him the competent landlord) then the head lease is worth very little