Communal areas lease has less than 75 year as well as lease on flat. Help Please

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    Communal areas lease has less than 75 year as well as lease on flat. Help Please

    Sorry if this has been answered before, but I have had a good look with no joy.

    Just over two years ago, I bought a flat in a block of 12 with 75 years lease and the communal areas has a separate lease to the management company of 74 years. The management company is owned equally by the 12 flat owners.

    I appreciated this would be an issue and went into the purchase with my eyes open. I appreciated that for two years I did not have a right to extend the lease, so for the last two years I have helped the management company to bring the block up to date. (fire system, decorating, repairs).

    We are now at the stage where myself and one of the directors of the management company appreciate that the lease should be the top of the agenda and not just continuing to spend money on improving the block.

    The block is made up of mainly 1 bed flats with only 4 owners living in their flats.

    The flats have devalued by over 25% since the peak of the boom in 2006, even though they are in a very desirable area + close to uni's + hospitals. Now that we have sorted some safety issues out, it should be obvious that the value is been affected by the lease. For instance my flat sold for 110k in 2007 and in Dec 2011 I paid 82k. The only flats to change hand since have been by auction.

    Enough history I hope. I appreciate that I could extend my lease for around 5 to 6k + costs. The problem is the communal areas lease, as if I do nothing in 73 years time I would have not access to my flat. Therefore I believe I need to get the management company (the other residents) to purchase or extend the lease.

    My problem is working out a rough cost for this, as I appreciate that I need to get 50% of the owners to agree to this and contribute.

    What I plan to do is find a local surveyor / solicitor who is an expert in our area and complex lease issues.I appreciate I (or hopefully the management company) may need to pay for some detailed advice. Hence why I am posting. I do not want to waste time and money if I am on the wrong track.

    Also the Freeholder is a professional property company who is fully aware of our problem and is in no rush to sell and will only sell if his hand is forced.

    Answers to the following please:
    1)Am I on the correct path?
    2) how do you value the communal areas of a block of flats?
    3) Am I best to just go for extending the lease of the communal areas, or get the management company to try and buy the freehold. I think we should be able to get 50% of the owners interested, especially as they will see the value dropping. How in practice do we cope with the fact that some of the owners will not be able to contribute to the cost of extending the communal areas.
    4) Would we be better looking at this from a total different perspective and try and purchase the whole freehold, with any of the other owners who are interested / able, then re write the lease in a more straight forward way.

    Then end objective is like all the posts on here, protect the value of my flat at the least cost and effort. Sorry for the length of the post, I have tried to put as much detail in to help with any advice.

    Thanks in advance virgin landlord.

    #2
    on the wrong track. you must continue to maintain common areas to the standard in, and for the duration of, the common areas lease. its length does not affect flat values at all, you hand it back in 74 years in good order and the freeholder carries on where you stop. as it does have a value i would exercise right to manage which leaves control in residents hands after ca lease expiry and spnd money on lease extensinns and the building, not buying the freehold. with many btl fflat ow ners this is likely to be supported as it is a low cost approach.
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


      #3
      Thanks for your prompt response. Just for clarification. We do not need to worry about the common areas lease until it expires and then it is covered by some other legislation 'right to manage'. Therefore getting an extension by default on the common area? If this is the case, all we need to do as individual owners is apply to extend our individual leases asap with the free holder and it is no big issue? You state that the common area does have a value though? Which has confused me a bit?

      Thanks again

      Comment


        #4
        your question arises because you are trying to relate it to your earlier understanding, dont.my post explains what is relevant and what to do
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          Thanks again, you can tell I was given some duff advice, from when I bought the flat.

          Life seams easier now, communal areas not a concern and I do not have to get all the other owners involved at all. Just ask for an extension to lease on my flat. If unable to come to an agreement with the Freeholder I will need to go down the formal route, which does not worry me at all as I always expected that I would have to.

          Thanks again

          Comment


            #6
            Why not enfranchise the freehold of the block?

            Costs about same as extending the leases and you and your fellow leaseholders will then jointly own the whole building.

            Comment


              #7
              That was what I was originally suggested as the solution of the two lease which had a slightly different time span. But the problem is being able to give an accurate estimate of the costs, without which getting enough of the other owners on board will be difficult.

              But if I can protect the value of my flat by just extending my lease surly that is the simplest answer.

              The main problem, I have just thought of, is if I go through the cost of extending my lease and then sell. If the purchaser's solicitor makes a point of the communal lease being less than 75 years, as my current solicitor would. Then I have wasted my time and money. Unless I can get my solicitor to prove that it is irrelevant as suggested by leaseholdanswers.

              Comment


                #8
                Have you purchased a copy of the property title of communal areas and site plan from Land Registry Online and checked the identity of current owner and if any annual ground rent is paid ?

                Some blocks have 2 freeholders , one owning the land under the building footprint to collect the ground rent and other owning the garden areas up to the boundary fences or public footpath.

                If your situation is similar and the communal areas are paid from your service charges, the management company owned by the 12 leaseholders should try to buy the freehold of communal areas for a nominal sum.

                Comment


                  #9
                  The common parts lease expiry only presents an issue if the landlord’s resumption on expiry is not as comprehensive as the CP lease. By checking that and your own lease you can establish that the LL’s future obligations are the same (and by implication written down in a document) as that under the cp lease.

                  If not the right to manage resolves that problem while preserving residents control in perpetuity.

                  Even if you buy the freehold, the cp lease is still the contract with owners to look after these areas, and if you choose to surrender it, you may need to amend all the flat leases to ensure that the freeholders obligations are spelled out, or amend the cp lease to say 999 years.

                  Unless you do that, if controlling residents adopt the pattern of “don’t spend” as in the past, the lack of clear contract with individual owners on what they must do will cause a problem.

                  In short
                  -Your problem; extend the lease and if you wish get everyone to exercise RTM
                  -Our problem; buy the freehold and amend and extend all leases or buy the freehold and extend the cp lease, and individual leases as and when

                  As the latter will cost a lot of money the your problem approach is the most robust and will likely get most cooperation.
                  Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                  Comment


                    #10
                    Thanks again for your views. Just reading through the Common parts lease, it is all about setting up the management company. The right for them to raise a service charge and their responsibilities. It does not look like the management company has to pay any rent on this lease and I cannot see a charge in the accounts for rent to freeholder.

                    The freeholder is the same for both leases, or was 2 years ago.

                    Therefore I feel my path forward is that,I get the management company to engage a good local expert to read the leases, give valuations and advice us on our options.

                    If that fails, I will extend my individual lease anyway, as it will need doing whatever.This should be enough when I sell, as long as my solicitor can prove the the common parts lease is irreverent due to the right to manage, if questioned about it in the conveyancing process. Unfortunately as soon as I formally raise at the AGM, it will have to be declared, but that is what I would expect if I was buying anyway.

                    Thanks again on both your advice and I appreciate it is difficult for you with only the facts I have put down. My solicitor was right to point out it was an issues, but perhaps not as big as he made out, I just know it will be cheaper to sort out sooner than later.

                    Regards

                    Comment

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