Freehold flat, 70 year lease = marriage value?

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    Freehold flat, 70 year lease = marriage value?

    Hi my partner and I are looking at buying a share of freehold flat with 70 years remaining on the lease. There are 3 flats in the building. The vendor has agreed to serve a section 42 notice so that we can begin the lease extension process before completion. She has agreed to pay her costs and we will pay ours. My question is will we be subject to marriage value after the extension? Does the marriage value pertain to us or the other 2 freeholders?
    If it pertains to the other 2 freeholders is it possible to have them legally agree to not claim marriage value before we proceed?

    #2
    I should add that I do not know the length of the other 2 leases (I don't know if this affects my question or not!)

    Comment


      #3
      Your solicitor should first ask the freehold company what their policy is when coming to lease extensions. I bought a share of freehold flat with 74 years left. The freehold company was going to extend all the leases at nil cost in the following year. So we all extended to 999 years at nil cost the year after I bought. You can find out the length of the other leases by downloading the freehold title of the property from Land Registry for £3. If the others haven't extended, this may work in your favour as you can suggest that you all extend at nil cost paying only your solicitors fees.

      However you may have a problem in getting a mortgage with only 70 years left on the lease.

      Comment


        #4
        Thanks for your reply. The freehold company is currently the three leaseholders in the building. I will take a look at the land registry records.
        My lender seems to be ok with the lease length.

        Comment


          #5
          Ok I've looked at the land registry records and each flat has a lease of 99 years from 25 December 1984. I will suggest that we all renew at the same time. Is there any advantage/disadvantage to us being the only ones to renew? Presumably we could benefit from marriage value if the other freeholder decide to renew at a later date? Also is there any advantage to renewing to 999 years instead of 90?

          Thanks

          Comment


            #6
            The best scenario is all 3 of you renew at the same time as you can use 1 solicitor. The only cost would be each of you paying your solicitors costs typicallly 400 to 500 pounds. If two of you renew for no cost, it would be unfair to charge the third leaseholder at a later date. 999 years is more appealing to buyers.

            Comment


              #7
              Thanks. I have proposed that we all extend at the same time. If the other freeholders decline, is there any disadvantage to us?

              Comment


                #8
                Hi trunkie,

                I would say get the vendor to extend the lease to a length agreeable to you and your partner before you buy. That way it is up to her to arrange to have the lease extended with the agreement of the other freeholders and for her to pay the premium (if any) and the legal costs to do so.

                This way the marriage value and any problems associated with all the parties being in agreement is not your concern. If your vendor refuses to do it this way I would want to know why.

                I think it will be in the memorandum and articles of association of the freehold company that once you purchase the leasehold interest you will become an equal shareholder in the company. Be mindful that after you purchase you will need three people including yourself of course to all be in agreement in future to change anything. Also, depending on how long you keep the flat, these people will change over time.

                Comment


                  #9
                  Just to add to my post above, I would recommend you read this article on buying freehold flats. Granted you are buying in as a freeholder but it will give you the reality associated with buying flats and plenty food for thought.

                  http://leaseholdpropertymanager.blogspot.co.uk/

                  The blog is maintained by the prolific poster on this forum: leaseholderanswers

                  Comment


                    #10
                    Originally posted by trunkie View Post
                    Thanks. I have proposed that we all extend at the same time. If the other freeholders decline, is there any disadvantage to us?
                    No. It is in their best interest to extend now as it becomes more difficult to obtain a mortgage with less than 70 years on the lease. Ask your solicitor to draw up a Deed of Variation to extend the lease which can be in the sellers name. The other 2 leaseholders sign. You all agree to not charge anything for lease extensions if they do not want to extend at this time.

                    Comment


                      #11
                      Thanks. But even if the other freeholders do not wish to renew at this time, couldn't they claim a premium from us for the uplift or is this negated by the fact that they have yet to achieve the uplift on their properties?

                      Comment


                        #12
                        trunkie,

                        No you cannot prevent the "legally agree to not claim marriage value before we proceed" as the proceeds of the lease extension premium ( which will include marriage value) will be determined and divided up as the company/freeholder ha, hopefully, agreed earlier. The flat vendor is the one likely to benefit form the proceeds, rather than you, and this should be taken account of by them in their sale.
                        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


                          #13
                          Thanks for your reply. Would you mind explaining how "The flat vendor is the one likely to benefit form the proceeds, rather than you, and this should be taken account of by them in their sale"
                          Do you mean they will have marketed the flat with this in mind? Sorry for all the questions, I'm just finding this whole process incredibly complicated and confusing!

                          Comment


                            #14
                            The freeholder owns a valuable asset in that lease extensions are wortht something to the freehold company and its members or shareholders, or the people that jointly own the freehold.

                            therefore they should have or as is sadly the case will have to decide how they will split your cheque for the lease extension premium.

                            I doubt the freeholder or your vendor are fully aware of this.....
                            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


                              #15
                              So provided that the 3 current freeholders (the vendor and the other 2 flats) agree that we can extend our individual lease for £1 then everything is good and no marriage value will come into play?

                              Comment

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