Advertised as freehold maisonette, found out it has shortish lease- extend??

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    Advertised as freehold maisonette, found out it has shortish lease- extend??

    Situation:
    Offer accepted on upper floor maisonette with attic space to be converted STPP. Told freehold, transpires this is shared with ground floor maisonette and also there are 86 years of an underlying 99 year lease remaining, current ground rent of £150 rising to £900.. The other leaseholder seems to have the same length of lease, but with ground rent £100 rising to £800. Basically I am assuming the two leaseholders of the upper and ground floor maisonette own and share the freehold interest in the building

    After a reading around about this, I am pretty much still confused. My queries are these:
    - is there any valuation difference between a 'shared freehold' with 87 year lease remaining vs. 999 year lease
    - presumably if the 2 leaseholders also own the freehold interest, why wouldn't they have just assigned a very long 999 year lease at the time of acquiring the freehold interest? Because of solicitor fees, couldn't be bothered?
    - or does it basically not make any material difference about the length of the lease if the leaseholders own the freehold as well, given that even as it declines with time, there is no issue with having to pay more to 'a freeholder' to extend when the lease approaches below 80 years (or shorter)
    - is there any reason why the ground floor co-freeholder would not wish to extend the lease to 999 years - surely it can only be advantageous to him/her as well?
    - Finally, if extending the lease is important, presumably this should be done by the current vendor before completion, given that I would need to own it for >2years before I can extend it myself?

    Any help/clarification would be much appreciated!

    #2
    There is if course no such title status as share of freehold. What you are buying is the leasehold interest and on completion you will at the same time take a transfer of the freehold title with the transferee being the two current leaseholders to yourself and the leaseholder of the other flat.

    The other lessee will need to be involved In signing the TR1 form to enable go effect to the transfer of the freehold. Is it worth finding how much your solicitor would charge this lessee to extend their lease at the same time as yours. Then put this to the other leaseholder.

    Comment


      #3
      Thanks - agreed with all above. And we can get solicitors to advise on costs of extending lease for both mine and the other leaseholder.
      But main question is, what is the value/advantage of doing that if t he freehold title is in our names anyway?

      Comment


        #4
        If you don't and sometime in the future the other leaseholder becomes awkward having a short lease and a 50% interest in the freehold will not resolve the problems on a sale or putting it up as security. Best to do it now if you can

        I know of a few cases where the the leaseholder disappeared and this made it very difficult indeed to get a lease extended as that leaseholder has to be found. There are statutory provisions to deal with absent freeholders but it could easily cost you £5k in legal fees

        Comment


          #5
          Sorry, I might be being slow here!
          Do you mean by having a relatively short lease, as this gets shorter, when we come to sell on, a purchaser will be more reluctatnt to buy it or a lender will be less willing to lend on it?
          From a purely technical perspective- as the lease kept going down towards 0, and eventually expired, surely there is no real affect on the value of the property (unlike if there is a separate freeholder that has a material interest in it) because it would be reverting to yourself anyway?

          Plus is it also true that we need to get the vendor to do this before completion, as we would have to wait 2 years to hold onto the lease before we can consider extending it afterwards?
          Thanks

          Comment


            #6
            The point to remember is the leasehold interest and your joint ownership of the freehold are completely separate and independent. Your lender will only take a charge over the leasehold interest

            Your fellow leaseholder could sell his leasehold interest and keep the freehold interest he had with you and then demand a very full price to take part in extending your lease

            Comment


              #7
              Originally posted by plastics View Post
              From a purely technical perspective- as the lease kept going down towards 0, and eventually expired, surely there is no real affect on the value of the property (unlike if there is a separate freeholder that has a material interest in it) because it would be reverting to yourself anyway?
              Wrong. You are about to buy 100% of the leasehold, but the freehold title won't belong to you fully. So whilst the value of the lease goes towards zero, the value of the freehold increases. Unfortunately, you are not the only owner of the freehold.

              Plus is it also true that we need to get the vendor to do this before completion, as we would have to wait 2 years to hold onto the lease before we can consider extending it afterwards?
              Correct, for a lease extension you need to have owned the lease for at least two years. Get it done now, ideally get two 999 year leases drawn up for both flats so that you can then sell a fully valuable lease and haven't got the same issue in another 30 years.

              Comment


                #8
                The key point to remember is that the freehold and leasehold titles are seperate legal titles. Even if you are a joint freeholder it does not eradicate the need to extend your lease.

                Furthermore, the two year ownership rule only applies if you are seeking a statutory lease extension. It seems likely that you will be able to agree a 999 year lease extension voluntarily with the other flat owner and therefore the two year rule would not apply. It might be an idea to ask the vendor if the other flat owner is agreeable to extending his/her lease and will consent to your lease extension after you have puchased the flat.

                Good luck!

                Comment


                  #9
                  Thanks all for your help
                  And finallly, is there any possible reason a fellow co-freeholder as in thsi case, wouldn't want/agree to jointly extend the length of the lease - presumably the fees wouldn't be very high?
                  And if the vendor doesn't agree to getting the lease extended before the completion of sale, would you stay clear of it - i.e. is it a very risky situation to be in at 86 yearss with share of freehold? The lender seems to be completely fine with it

                  Comment


                    #10
                    There are some people who like being awkward and logic can't explain their actions

                    Comment


                      #11
                      Exactly. Most of them are called either landlords or tenants

                      Comment


                        #12
                        Originally posted by plastics View Post
                        Thanks all for your help
                        And finallly, is there any possible reason a fellow co-freeholder as in thsi case, wouldn't want/agree to jointly extend the length of the lease - presumably the fees wouldn't be very high?
                        And if the vendor doesn't agree to getting the lease extended before the completion of sale, would you stay clear of it - i.e. is it a very risky situation to be in at 86 yearss with share of freehold? The lender seems to be completely fine with it
                        In these cases they are often lost as you were in the notion of (the laughable)"share of freehold with an underlying lease".

                        if you explain that it is the lease that you each own as the principal asset, and offer to pay for the extension of both leases, they might be more inclined.

                        After all they don't see the need to extend and why therefore pay out money for "nothing?
                        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.

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