Is it worth buying freehold if flat is currently on a long lease...?

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    Is it worth buying freehold if flat is currently on a long lease...?

    The majority of members of our flat block are jointly purchasing the freehold of the building at a cost of approximately £10K each. As there are 20 out of 30 flats already on board with this, I have the opportunity to join them or opt out.

    My question is, is it worth spending £10K+ on buying a share of freehold if the lease is 900+ years anyway. Would the new freeholders have the power to change my lease length if I opt out?

    Any advice would be appreciated, thank you!

    #2
    No, they couldnt change the lease length. You may have greater control over the management of the block if you are a member, not sure whether thats worth 10 grand or not.
    Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

    I do not accept any liability to you in relation to the advice given.

    It is always recommended you seek further advice from a solicitor or legal expert.

    Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

    Comment


      #3
      Are all the leases very long like yours? I am in a similar situation where the freehold is being bought as the other 4 flats leases are short. Mine was extended so I feel that there is not much point in buying into the freehold. It won't add any extra value to my flat. Unless you want to be actively involved in the running of the Company (ie be a director), I would not spend 10K.

      Comment


        #4
        Thank you for the input - I think I'm inclined to agree. All the leases are the same length - they were issued at 999 years I think. I'm wondering whether all I'll save is the £250pa ground rent in which case £10,000 doesn't seem worth it. But perhaps you get kickbacks in the form of reduced buildings insurance etc.

        Comment


          #5
          How old is your building ? You should check whether the leases are for 999 years or 99 years. The lease is a long term rental agreement and often written on unfavourable terms for the leaseholder.

          Buying the freehold title is better for the flat owners as they will collectively own the building and land.

          If the lease is really 999 years, then at most the contribution per flat is about 18x - 20x the annual ground rent .

          Comment


            #6
            As above,

            You are being asked to pay the freeholder £ 300,000 for the freehold

            Yet the calculations £ 250 x 30 flats is only £ 7500

            Suggest you make futher enquiries about the cost of the freehold, assuming there are no out buildings, Garages that are only rented, swiming pool etc, etc

            Comment


              #7
              Gordon999,

              It was built in 2005 I believe, the leases were for 999 years at that point. I am aware we are paying over and above for the freehold but the current freeholder won't budge on price. This is another reason why I'm not inclined to pay so much.

              Comment


                #8
                Correct the freeholder is wanting something along the lines of £225K and this is after negotiating hard. The other interested parties are happy to contribute to this sum, but I'm concerned a) we're paying over the odds and b) how will it benefit me anyway as my lease is 900+ years.

                If the deal seemed to be better I'd snap it up, but it just places me in 2 minds.

                Comment


                  #9
                  Originally posted by kmckay View Post
                  But perhaps you get kickbacks in the form of reduced buildings insurance etc.
                  True the insurance will be lower however all leaseholders will benefit, not only the ones who have bought a share of the freehold. Service charge percentages will stay the same. The only thing you wont be able to do is vote at the AGM or have a say in the running of the building.

                  It will be interesting to see what they do about the ground rent as theoretically they will still have to collect it from all leaseholders unless they decide to rewrite themselves a new lease without the ground rent. For a saving of 250.-GBP a year, not worth buying IMO.

                  Comment


                    #10
                    Is the freehold just being negotiated freely with the freeholder?
                    It is usually far better to use the rights within the Leasehold Reform Act where the cost of the freehold is derived from a specific formula and forces the freeholder to transfer the freehold. It will be far cheaper under this method. If the freeholder is experienced he may be hoping the leaseholders will cough up far too much!
                    If you haven't read all about it have a look at www.lease-advice.org

                    Comment


                      #11
                      What is the ground rent per flat and when if ever does the ground rent rise

                      Comment


                        #12
                        What is the motive for buying the freehold as clearly it is not short leases? Are the service charges very high? Is the building well managed? Is the building managed by a managing agent? If the freehold is bought, will the Company still use a managing agent? In your case with 30 flats you will still need a managing agent.

                        Leaseholders think it is easy to run a building and it can be straightforward if there are a small number of flats and you have cooperative leaseholders. However, if you have incompetent directors and / or uncooperative leaseholders, share of freehold can become a nightmare.

                        Comment


                          #13
                          I am inclined to disagree on price- if 20 are participating at £10k each thats £200,000.

                          At £250 per annum per flat, back of the envelope says £120/£150K. Barring other income or values, its overpriced, but if they have offered you on the basis of a right to first refusal they likely have a buyer at that price who knows more than I do from your post and/or is looking at other income such as management fees commissions etc.

                          1. You could get a local chartered surveyor to value and see if it is worth ignoring the R2FR and enfranchising under the right to collective enfranchisement at a lower price.

                          2. You are right that with 900+years and lets say you live there for 5 years thats only £1250, not £10k which can be spent on sweets and comics. Or power tools.

                          In these cases I always recommend looking at the service charge to see if the current or new landlord is going to give you a "fair deal" in return for the hassle of looking after your block,and if not, to seriously look at right to manage as, in 2 above, thats £8000+ that could be spent on larger items such as decorating, carpets roofs etc if the block does or will need them.

                          Why therefore give it to the freeholder to spend on themselves when all you need to do, at no real cost, seize control via Right to manage?

                          By all means pass its on to your group to think about and remind them that there is no such thing as share of freehold, and that advice on right to manage and collective enfranchisement can be found at lease-advice.org
                          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


                            #14
                            bbva,

                            The motive is that is has been grossly mismanaged by the current freeholder and his management company. The current leaseholders are keen to take control and employ their own management company to run it. The way that I see it service charges are unlikely to go down that much - and I'm guessing still need to be shared between all the residents, so I'm still left questioning whether the £10k is worth it for us personally.

                            Comment


                              #15
                              leaseholdanswers,

                              Thank you this is really useful advice. You're absolutely right, they have offered first right of refusal saying they have other buyers. The group have looked into the options you've stated and have unanimously agreed to accept the price as offered - which basically leaves me with the option of chipping in or not. Can you please explain to me what you mean as 'there is no such thing as share of freehold?'. Thank you.

                              Comment

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