RFR Right of First Refusal Auction

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    #16
    Originally posted by Centurino View Post
    The reserve has been disclosed as £62,500. We've decided to challenge the 5b notice, asking the freeholder in possession to sever the flats from houses and reissue the 5b.
    On whose advice?

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      #17
      Head of LEASE yesterday and 3 solicitors during the past week. We don't want the whole site as it's always been split and the flat residents don't value the flats only at that £62,500. The house leases also say they should pay a management fee but never have in 15 years and also, the 5a offered only the flats in 2015. So we've decided on this route, we're not going to file a Notice of Acceptance and we'll negotiate after the 2 month period. If all that fails, we'll pump all our resources into a challenge post-auction.

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        #18
        Disclosing the reserve merely indicates the minimum you will need to pay post auction, £62500 would give the buyer >10% yield. Are they suggesting you could collectively enfranchise? Otherwise it sounds risky not reserving your rights

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          #19
          If the leaseholders reserve their rights to RFR, there will be less interest at auction in bidding and your buying price will be lower.

          Send a letter to the auction company asking for the interest in the RFR to be put into the auction sale catalogue and in the auctioneer's box of legal documents for your estate for viewing before auction.

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            #20
            Originally posted by Centurino View Post
            1. Yes. 13 flats and 27 houses.

            1 x 165.73. 2 x 131.90. 2 x 289.26. 5 x 145.79. 5 x 225.63. 8 x 151.87. 17 x 150.52. Total Income: £6,638.95.

            2. We know all of this information and have all 40 leases and all Land Registry deeds as the original freeholder liquidated in 2012. We're now dealing with the mortgagee in possession and the Duchy.

            3. This is an auction so we cannot make an offer to the freeholder. We did previously and was ignored. You've valued it at 18 times ground rent, we're estimating a maximum of 15. We will be exercising our RFR as the flats only and self-funding. We are not involving the houses as we wish to manage them.


            Q: As we have two blocks of flats 9 & 4 = 13. Do we submit one or two Notices of Acceptance?

            Thanks

            Centurino,

            The reserve price of £63K approx is only £1600 if shared between all 40 leaseholders.

            if you can raise this money £1600 from every leaseholder, make an offer to the" Mortgagee in possession".

            Alternatively contribute £500 each and nominate two or three of the leaseholders to borrow from Tesco or Sainsbury Bank to cover the cost . ( 7 year loans charged at 3.9% interest )

            Your previous offer to freeholder was ignored due "Mortgagee holding a charge over the freehold title ".

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              #21
              Additionally, there will be legal costs which we estimate to be around £300-600 per resident plus varying each lease where required. And how much will the Duchy want on top of the purchase price?

              The questions we're also struggling with, who will run the new company and manage the common areas (not currently managed by the flats)? And will the houses buy their freehold and then disappear leaving the flats to sort out the above?

              We have 2 weeks and 5 days to get the RFR Acceptance Notice submitted if we're proceeding.

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                #22
                You could do a deal with an investor who would buy the freehold interest to the houses at the same time you have to complete on the purchase

                I may be that investor - send me a personal message

                If that would solve your problem then you should reserve your rights and you may we’ll get the freehold at a very good price

                It is very important you get professional advice on reserving your right at auction - it is easy to trip up on that

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                  #23
                  An outstanding question is what are the costs if we choose not to accept the RFR post-auction?

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                    #24
                    Whatever your legal costs were in communicating your acceptance

                    how much tine do you have before the auction

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                      #25
                      The letter challenging the 5b has gone out today to the 5b serving solicitor, asking them to serve a new 5b excluding the houses. However, I don't believe they will do this nor respond to that letter. We have 2 weeks and 2 days to get an RFR acceptance notice delivered if we wish to go this route. We see strong pros and cons both ways.

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                        #26
                        What is the ground rent review pattern for the various leases

                        Aside from a legal bill perhaps of say £1,000 from your solicitor I see no downside in you reserving your rights. As you know if you decide not to proceed and withdraw 28 days after then no costs are recoverable from you from the other side.

                        As a result of reserving your rights you will find all interest from investors disappears, and you may acquire the whole thing for around £63k - if you then immediately dispose of the leasehold houses you should get back around £42,000 for the houses and quickly as section 5 will not apply. This will leave you paying £21,000 for the freehold of the flats. You may need to find an investor to either buy the houses or lend you the £42,000 while you try and find a buyer. Expect to pay around 0.3% per month however on any secured loan ( i.e £126 per month) - however that will be offset by the ground rent income the house will produce whilst you find a buyer which will be around £350 - so in fact you will make a profit.

                        I think challenging the validity of the 5b notice is the wrong road to go down.


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                          #27
                          But it isn't valid as it was wrongly served on the houses as well, which should have been severed as on the 5a in 2015. We expect a reply within 7 days. The problem we have is, that some of the flats naively believe the imminent reform will wipe their ground rent completely. I don't believe it will and am eager to buy the flat freehold ASAP to wrap this 15-year nightmare up. If we fail to submit the acceptance notice by the 5th March, maybe we'll get the offer we want, £15-20k to buy the flats only.

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                            #28
                            Originally posted by Centurino View Post
                            But it isn't valid as it was wrongly served on the houses as well, which should have been severed as on the 5a in 2015. We expect a reply within 7 days. The problem we have is, that some of the flats naively believe the imminent reform will wipe their ground rent completely. I don't believe it will and am eager to buy the flat freehold ASAP to wrap this 15-year nightmare up. If we fail to submit the acceptance notice by the 5th March, maybe we'll get the offer we want, £15-20k to buy the flats only.
                            £15_20k seems unrealistic. What was the value given in 2015?

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                              #29
                              What are the ground rent terms ? They appear to be indexed linked.

                              The idea I have suggested should enable your nightmare to come to an end in a matter of a few months.

                              It appears you are considering taking no action and then seeking to recover the freehold from the purchaser on the basis that the section 5 process is invalid and acquiring the part you want (i.e. the block of flats) on the basis of a pro rata valuation based on what the purchaser paid. The circumstances of this case are unusual and if challenged by the purchaser your nightmare continues and your legal costs could be quite substantial

                              An alternative would be to write formerly to the auction house, the freeholder and their solicitor advising that the Section 5B notice has been incorrectly served as the requirements to accept the notice are misleading. Their notice would imply, I assume, that more than 50% of all the 40 residents have to support the reservation of your rights, whereas of course 50% of the flat owners have to support the proposal. You then advise that it is your intention to challenge the sale after it completes. Almost certainly this letter would be disclosed in the legal pack if they chose to press head regardless

                              It is possible that they may reserve the notice just on the flat owners but offering you the freehold to the flats and the houses which of course would not assist you.

                              It is also possible that realizing the notices served our defective may agree to sell the freehold to the lessees of the flats at the reserve figure and avoid the lengthy delay in reserving Section 5b notices, and you source an external investor to buy up the freehold to the leasehold houses to tie in with the completion of the sale






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                                #30
                                If the section 5b notice is invalid the seller may pull the sale to avoid the risk of a prosecution; the auctioneer will generally refuse to auction if it is shown to them that the notices is void

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