Extend lease vs buying Freehold??

[pgharron]

Hi everyone,

I am the owner of a flat in a Victorian converted house. There are 4 flats in the building, each with a lease of 77 years remaining. The freeholder has offered us the freehold for £16,500 (Is that a fair price?). Myself and another leasee are interested in buying the freehold, but are concerned that the two other leasess are going to be quite hard to manage i.e. get ground rent, and insurance payments from.

My property is approx worth £150,000 and I've owned it for the past 5 years.

Also, I want to do the right thing and i'm not sure if it would be better to buy the freehold, or just get my own lease extended. Am I correct in thinking that if we bought the freehold we would eventually be able to claim some of the money we will be outlaying now when the other two leasees come to extend their leases (which I guess they'll want to do at some point).

Our relationship with the current Freeholder isnt great. Since purchasing my property I've never been billed for either insurance or ground rent, which could be seen as good but on th eother hand the building isnt very well looked after and the situation will only get worse the longer ots left.

I'd love to get it sorted but am unsure which direction I should go.

Questions I'd like answered on this forum is possible

How much approx it would cost to extend my lease?
Would it be worth buying the freehold instead?
Is £16,500 a fair price for the freehold?
How can myself and the other interested leasee ensure (if at all) we get funds from the other non interested parties


Any help would be greatly appreciated!

[sgclacy]

Hi everyone,

I am the owner of a flat in a Victorian converted house. There are 4 flats in the building, each with a lease of 77 years remaining. The freeholder has offered us the freehold for £16,500 (Is that a fair price?). Myself and another leasee are interested in buying the freehold, but are concerned that the two other leasess are going to be quite hard to manage i.e. get ground rent, and insurance payments from.

My property is approx worth £150,000 and I've owned it for the past 5 years.

Also, I want to do the right thing and i'm not sure if it would be better to buy the freehold, or just get my own lease extended. Am I correct in thinking that if we bought the freehold we would eventually be able to claim some of the money we will be outlaying now when the other two leasees come to extend their leases (which I guess they'll want to do at some point).

Our relationship with the current Freeholder isnt great. Since purchasing my property I've never been billed for either insurance or ground rent, which could be seen as good but on th eother hand the building isnt very well looked after and the situation will only get worse the longer ots left.

I'd love to get it sorted but am unsure which direction I should go.

Questions I'd like answered on this forum is possible

How much approx it would cost to extend my lease?
Would it be worth buying the freehold instead?
Is £16,500 a fair price for the freehold?
How can myself and the other interested leasee ensure (if at all) we get funds from the other non interested parties


Any help would be greatly appreciated!

In order to reply more fully please let us have the following

What is the ground rent for each flat and does it rise

What is the values of the other flats IF they had long leases and no ground rent

Assuming each flat is around £150k each and the ground rent is around £75 each and assuming the property is in the South East I think the figure of £16.5k would seem a good deal. I would estimate, using the criteria I have just outlined, a figure of around £23k

The cost of a lease extentsion in your case assuming this criteria would be around £6k


What part of the country is the property situated in

[pgharron]

Thanks very much for your reply - very helpful. Fyi The ground rent for each flat is £100/year fixed and the value of the other flats are approx around the same value as mine.

The property is in Lewisham, SE London

Thanks

[jeffrey]

Thanks very much for your reply - very helpful. Fyi The ground rent for each flat is £100/year fixed and the value of the other flats are approx around the same value as mine.

The property is in Lewisham, SE London
It's almost always more cost-effective for the collective lessees:
a. to purchase the entire f/r; then
b. to extend leases non-statutorily.

[sgclacy]

Thanks very much for your reply - very helpful. Fyi The ground rent for each flat is £100/year fixed and the value of the other flats are approx around the same value as mine.

The property is in Lewisham, SE London

Thanks


Thank you for that info recalculating the value of the freehold if you applied under the Act would be nopw nearer to £24k.

The growth in that figure as the lease falls from 77 years to 70 years is quite vigourus and I would advise you very strongly to take up that offer.

For example assuming the value of the flats is the same in 5 years time the cost under the act would be around £33k ;a growth of around 6.5% compounding

[pgharron]

Hmmm that's a big increase - Thanks very much for the info.

It makes sense to but the Freehold I think.

[Bazman]

Hi there,

I am considering buying a flat in the borough of Lewisham. Ideally it will be freehold. However for the right price I might consider leasehold.

I see that some forum members have given guesstimates for how much buying a freehold might cost.

Is there a forumla I can use to do this? Say flat price £250k 99 year lease etc.

Also how do I find out how the freeholder is if I'm still looking?

If I did buy a leadehold flat with a 21y+ lease how long would I have to wait before I can buy the lease?

am I always legally entitled to buy the lease?

If so is this still the case if it is not my primary residence?

Thanks

Baz

[jeffrey]

Never, ever buy a freehold flat.

You say If I did buy a leadehold flat with a 21y+ lease how long would I have to wait before I can buy the lease?

am I always legally entitled to buy the lease?

If so is this still the case if it is not my primary residence?

but that's clearly nonsense. When you buy a lease, you -er - buy a lease. However, it's possible to use two statutory routes thereafter:
1. Individual lease extension (two-year qualifying period).
2. Collective enfranchisement (no qualifying period).

No, neither requires owner-occupation.

[Bazman]

Hi there,

>Never, ever buy a freehold flat.

Can you elaborate please I find that very surprising surely share of freehold is far better than leasehold?

You can directly control building management thus controling cost and quality.

No possibility of loosing the property.

>>You say If I did buy a leadehold flat with a 21y+ lease how long would I have >>to wait before I can buy the lease?

>>am I always legally entitled to buy the lease?

>>If so is this still the case if it is not my primary residence?

>but that's clearly nonsense. When you buy a lease, you -er - buy a lease. >However, it's possible to use two statutory routes thereafter:
>1. Individual lease extension (two-year qualifying period)

>2. Collective enfranchisement (no qualifying period).

>No, neither requires owner-occupation.

OK good to know. I am just trying to work out the cost of buying the freehold or share of freehold. So that I can factor it in to my overall costing.

Can you give the relative merits of the two options above. Why would I opt for lease renewal if I can buy share of freehold?

Also if there are only two flats in the block and hte other resident doesn;t want to buy their share out. Can I buy and keep both myself?

Is there a way I can get my own guesstimate figures? A website that provides such info would be fine.

[jeffrey]

Please use LZ's 'quote' facility.

[jeffrey]

Never, ever buy a freehold flat.

Can you elaborate please I find that very surprising surely share of freehold is far better than leasehold?
Although individual ownership of a freehold is possible, it's EXTREMELY undesirable under English law. With one recondite exception ('Commonhold'), flat1's owner has no legal relationship with flat2's owner. All covenants (positive and restrictive) are unenforceable.

This is chiefly why English law uses the method of freehold/leasehold for flats- so that there is a superior tier of title whose owner can enforce against all leaseholders (and who, in many cases, can be compelled by flat1's leaseholder to enforce against flat2's leaseholder).

Where the collective leaseholders own- often through their company- the f/r ('share of freehold'), the same is true. The flats are NOT freehold flats; each owner is still a leaseholder.

[Bazman]

Hi there,

Sorry to be thick but what do you mean by the quote facility?

Baz

[jeffrey]

Either:
a. the button that says 'Quote'; or
b. the button next to it that, when pinpointed, shows 'Multi-quote This Message'.

Telephone me if you need help on this!

[Bazman]

Ah OK understood.

At first I thought you meant an online cost generator for the cost of acquiring commonhold/sof!

I will need proper quote when I find a property that I want (and your help will be remembered when I do).

Trouble is I am just looking at this stage the idea of getting the full work down for each possible flat is likely to be too time consuming and costly. Is there anyway I can get some guesstimate figures for cost of converting to sof/commonhold. Just some rule of thumb would be fine.

Without getting some idea of the costs involved its difficult to decide if I even want to risk buying leasehold at all.

[jeffrey]

Forget Commonhold. All being well, the Coalition will put the hopeless scheme out of its misery.

[leaseholdanswers]

Developers wont risk "new" tenure, purchasers, who dont understand leasehold, but know to do what everyone else is doing*, and irrespective of what they say over lunch, lenders wont lend on it.

So case closed. I hope you have emailed Nick Clegg about it!

*eg the Judas phone