Should I request a deed of variation before exchange?

[groovybug]

Hello,


I'm in the final steps of completing a purchase of share of freehold flat in period conversion consisting of three flats. The lease is drafted a long time ago (in the 80s) when there was a commercial freeholder. It has gone through collective enfranchisement in the 2010, however there is no deed of trust/declaration of trust or any variations to the lease at that time. The building is now hold in trust with 3 owners in the title, and the owners manage the building together.



There are several issues that is bothering me:

One is my lease has 105 years remaining while two other leases have over 900 years remaining. Should I expect to be able to renew the lease to 999 years free of charge when the time comes, considering this is a share of freehold, or should I request this prior to completion?

Secondly, the way they are running the property is different the from the lease in several ways, the key point is the maintenance cost is split equally, while in the lease it is rateable value ratio. This way I will have to pay more, as my flat is smaller. However I don't mind as the staircase is now included in the common areas while in the lease, I'm responsible for maintenance cost of the staircase (I'm on the first floor). However should I get all this changes confirmed in a deed of variation, or should I just go with it?



Many thanks!

[scot22]

In my experience it is better to get everything in place that you require before buying. Leasehold can be a nightmare. As much as possible you need clarity.

[groovybug]

I want make the stamp duty holiday deadline. And I'm slightly concern getting the deed of variation agreed and signed by everyone might take time, when I'm not sure the issues warrant it.

[AndrewDod]

To address you two questions:

a) Can't see why you would/should get it "free". You all own the freehold, and part of the value of the freehold is your short(er) lease.

b) No they can't just make it up.

[andybenw]

To address you two questions:

a) Can't see why you would/should get it "free". You all own the freehold, and part of the value of the freehold is your short(er) lease.

b) No they can't just make it up.

But they CAN just make it up. As long as everyone agrees. As the major hurdle in these type of shared freeholds is getting unanimous freeholder decisions made, it could even be argued that making it up is for the best as long as everyone is happy with the situation.

Otherwise without agreement you can have all the lease terms, and all the leasehold law behind you, but your only two options are to force things as a 'pressure point' looms (sale, or maybe if another leaseholder needs something), or appoint a manager.

[andybenw]

Unless you are looking to live in the place for over 15 years or so then the lease length doesn't really matter to you. Seems like there is goodwill at present, maybe use that good will to extend your lease to 900 years after you buy, with ground rent a peppercorn there's not much reason for them to refuse

[AndrewDod]

But they CAN just make it up. As long as everyone agrees. As the major hurdle in these type of shared freeholds is getting unanimous freeholder decisions made, it could even be argued that making it up is for the best as long as everyone is happy with the situation.

Agree with that. I guess a lot is going to depend on the reason for the discrepancy -- e.g if they paid for the extension either to a previous company freehold or to the current company. If they granted themselves a free extension and this was at the same time as the other shareholder owned their share, they can hardly refuse to make it free - otherwise charging is very reasonable/expected.

[scot22]

Charging service charge differently to the lease is not a good sign.
it is being assumed that property will not change hands. Newcomers could think.differently. People can fall out.
In my experience flexibility leads to disaster. A lease should be followed correctly.
obviously up to you but do think about where there might be problems.

[andybenw]

For what it's worth, I am in this type of shared freehold. After a few years of hard battles to get maintenance reasonably up to scratch we now have new neighbours upstairs. Unfortunately they are first time homeowners, as a couple of other new leaseholders have been. It gets wearisome retreading similar ground, plus they don't seem to have any respect for others noisewise. So, I am currently in the process of getting ready to sell, and am going to combine the proceeds with a rental sale and move into a freehold property. So to the OP, I would say if you have any chance of affording a freehold house, I personally would be going that route.

[groovybug]

Sorry to hear about your circumstance. Unfortunately I'm in London so the prospect of a freehold property is remote at the moment. I understand Share of Freehold can be challenging, but it is still better than Leasehold, no? I have looked at a few leasehold apartment block, the service charge alone is over £2k a year, I can afford a much higher mortgage with extra £200 a month. I'm certainly wary about maintenance, especially if other freeholders are just letting. Could you not try to quote the lease term, or it is in reality pointless?

Back to my original questions, I'm advised that in these Share of Freehold that had gone through enfranchisement, certain terms can get outdated and no longer enforced (for example, almost no Share of Freehold collects ground rent anymore), so it is about trying to request the right things as well as not request the wrong things.

For example, if the service charge reverts back to the lease term (however we don't even have rateable values anymore), then I won't be worse off anyway. But as my lease is shorter than other leases, then I probably have to expect to pay extension fee when the time comes, and I can't expect the seller to extend it for me before exchange. So currently I feel I should just go with how things are. However I want to check with everyone here to see if I'm being too careless.

[Gordon999]

If the seller of leasehold flat is including a " one third share of the freehold title" and since collective enfranchisement in 2010, no ground rent has been demanded by the other 2 joint owners of the freehold, you have to assume the ground rent payment is an obsolete term.

If the service charge is shared equally, just accept the situation even if your flat is smaller. In my block , one and two bed flats pay the same service charge.

[andybenw]

Enfranchised shared freeholds normally don't collect ground rent because that ground rent has been reduced to a 'peppercorn'. Once you have bought, if the other freeholders don't agree to you extending your lease, after 2 years you can force a mandatory extension of 90 years. With ground rent a peppercorn, and (by then) 93 years remaining it should not cost too much.

Maintenance agreement is the biggest concern. Top floor is most at risk kinda obviously due to the roof so if yours is top floor have a really good look at the current state of the roof.

If this is a conversion, you need to think about building layout as conversions tend to be noisy and you would have practically no chance of getting any noise terms in your lease enforced.(that would have to be done by mutual agreement of all freeholders). Biggest lookout, you don't want a kitchen above your bedroom. Obviously top floor becomes the best option with regards to noise.

[groovybug]

Hi Andy, by noise term, do you mean even carpet/wood floor terms are hard to enforce?