Jointly buying freehold

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  • Jointly buying freehold

    Hello all,

    I need some advice please.

    I own a flat in a converted building on a leasehold basis. I extended my lease last year by purchasing the additional statutory 90 years, so my lease now is for 162 years remaining.

    The other 4 flat owners are also leaseholders. One of the 4 extended their lease a couple of years ago and the other 3 have something like 72 years remaining on their lease.

    I am very seriously thinking of contacting all my fellow leaseholders (as a joint email) to propose that we jointly buy the freehold of the building. The freehold is currently owned by an individual - none of us has any issues with him, he is a very nice man, the building is well maintained and the service charges are very reasonable. The reason why I am interested in buying the freehold together with my neighbours is because I think it would add value to our flats and I would be able to have my say on what's going on in the building (such as repairs, maintenance etc).

    Please can someone explain how this works? I am aware about setting up a limited company to hold the freehold and into which each leaseholder would have a share in the capital and own a lease for 999 years from that company, however, what I would like to know is the following:-

    1. How should I approach the 3 leaseholders who have not extended their lease yet and convince them to buy the freehold rather than extend their lease?

    2. How should I approach the leaseholder who extended his lease 2 years ago to convince him to buy a share of the freehold?

    3. My flat and the flat with an extended lease now have some 162 years remaining on the lease. Would our share in the price of buying the freehold be lower than the 3 other flats given that we have a much longer lease than the other 3? How does this work?

    4. How many leaseholders (out of 5) do we need to be willing to buy the freehold jointly and thus force the freeholder to sell? I believe there is a minimum number, what is it?

    5. I believe we would have to serve notice on the freeholder, how does that work?

    Many thanks for your help!

  • #2
    In your situation, I would not buy the freehold. You are happy with the freeholder and he takes good care of the building and the service charges are reasonable. Share of freehold can be a major headache with input from 5 different leaseholders. Don't assume that you will all agree especially as flats will be sold and you will have new leaseholders. As your lease is long, share of freehold will not add much value to your flat at all. It won't add value to those with short leases either - they will still need to extend. Unless you employ a managing agent, you will have to deal with all the daya to day runnings, accounts etc. Really not worth the headache.

    You will also run into problems deciding how much each must pay for their share. The ones with a shorter lease should pay more, but probably will want to pay the same plus get an extension for free.

    One of my share of freehold flat is great. We all get on well and there are no major differences. The other is a nightmare with a one rogue director and leaseholders who don't pay their service charges, legal issues - I could go on.

    Comment


    • #3
      That's an interesting point of view which I hadn't thought of.

      Do you mean that the market value of a flat with a lease of 162 years remaining is the same as if the same flat had a share of the freehold?

      Comment


      • #4
        Agree with last post leave things alone

        Comment


        • #5
          Originally posted by verylonglease View Post

          Do you mean that the market value of a flat with a lease of 162 years remaining is the same as if the same flat had a share of the freehold?
          Yes - it is the length of the lease that is valuable. Only if you have exhorbitant service charges, a terrible freeholder or a short lease that needs extending, then it would be worth pursuing the purchase of the freehold.

          Comment


          • #6
            Originally posted by bbva View Post
            Yes - it is the length of the lease that is valuable. Only if you have exhorbitant service charges, a terrible freeholder or a short lease that needs extending, then it would be worth pursuing the purchase of the freehold.
            and then only if you can't fix (either of) the first two with an RTM.

            Comment


            • #7
              VLL,

              A lease is only a longterm rental agreement and I think its better to own a share of the freehold ( and the building ).

              1. The free guides to "enfranchisement for block of flats" and the "valuation price" may be downloaded from www.lease-advice.org .

              2. In the situation of your block with 5 flats where 2 flats ( A&B) have already extended to 160 years and pay no ground rent and 3 flats (C,D&E) at 72 years paying ground rent, the freeholder can expect to receive the compensation fees for extending the 3 x 72 years leases and afterwards no more ground rent.

              3 You can calculate a rough cost for statutory lease extension for each flat using the sgclacy's method posted on LZforum No. 11080 ( lets say the calculated cost comes to approx 9000 per flat )

              4. Then write out a proposal for "collectively buying the freehold" with a bid price composed :

              Flat A = 250 (say, since lease extension already paid )
              Flat B = 250 ( as above )
              Flat C = 9000 (equal to cost of 90 yrs statutory lease extension)
              Flat D = 9000 (as above)
              Flat E = 9000 ( as above)

              Total = 28,000 ( example)

              5. You need to get quotes from a specialist solicitor firm to handle the conveyancing + producing the new lease to 999 years ( say quote is X pds )

              6 Write a letter inviting each flat owner to participate in buying the freehold and quote approx cost to each flat ( 200 + X/5 or 9000 + X/5 pds ) and make an appointment to discuss with each flat owner and see what response you get.

              Thats how I would suggest you start. If you can get 100% participation , then put an offer to the freeholder.

              Comment

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