extending lease with share of freehold?

[pandoralcy]

Hi there.

I'm looking to buy a flat which has been converted within a house, which has share of freehold, with a lease of 71 yrs. Am hoping to buy it but subject to the vendor extending the lease. I just have a few questions which I need some advice on.

1. Is there any difference in cost or any other issue when you come to extending the lease, if it was for 99 yrs or 999 yrs? and how long will the actual process take normally?

2. right now, there is no "single" building insurance.....each flat insures their own. Is that actually advisable or even legal? so what would happen say, if there is subsidence in the bottom flat and he doesn't have insurance?

Thanks in advance

[Gordon999]

1. If the leases of every flat in the block has fallen to 71 years, then all the flats with share of freehold company should extend to 999 years at same time . ( because legals costs of lease extension can be shared by several flats ). Problem is getting all the flat owners to agree to pay their share of the legal costs.

2. The building insurance should be under a single policy to ensure every flat owner is properly covered for all risks. Check wording in lease to ascertain if freeholder is responsible for collecting the insurance contributions.
How do mortgage lenders offer a loan if the building insurance is not properly placed ?

[jeffrey]

pandoralcy: for how long has V owned the existing lease?

[andyz1]

Pandoralcy, I am presuming you are meaning a house converted into several flats? And I presume you mean that the flats together own the freehold to the block?

If the flat has a share of freehold then the extension of the lease is a formality. Effectively the current owner is both lessee and freeholder (in part). There is essentially no need to pay himself the premium that would normally be due to the freeholder.

The cost is somewhat immaterial because you won’t be paying them, will you?! But a few hundred pounds of solicitor fees is reasonable. I would recommend consulting a specialist lawyer experienced in the field and you can get some initial free advice from your local one if you go to the not-for-profit Association of Leasehold Enfranchisement Practitioners.

It is normal for flat owners that own a share of freehold to go for the longest practical and economical lease extension and that is to 999 years. If you weren’t also a shareholder in the freehold company then the cost would be higher for longer leases.

In your circumstances the process should take a matter of a handful of weeks.

Regarding the insurance, it is perfectly common for individual flats to arrange their own contents insurance. However, it is preferable for the whole building to be insured as one to avoid problems such as the one you highlight. If this is not possible and each flat owner insures their own property, it should preferably be with the same insurer, to avoid arguments about who pays what, for instance when one flat floods another. Where there is an external freeholder, the buildings insurance is usually arranged by them and is normally their obligation. In many instances they arrange it and then cross-charge the flat owners at a healthy profit.

If the flats have bought their freehold then normally they should already have an arrangement in place to share the running costs of the building’s freehold. It is definitely worth double checking and your conveyancing solicitor will ensure all this is in order. If nothing else, your lender (assuming you are buying with a mortgage) will need to see proof that the building is adequately insured.

[norroy]

Surely the cost of extending would depend on the lease lengths for the other flats ?

If A has a lease length of 71 years, and both B and C have a lease length of 997 years. A, B and C own the freehold jointly and equally via a ltd co.

In that instance A would be expected to pay the normal market price for a lease extension to the freeholder, and one-third of this would then be returned to him as he owns one third of the freehold.

Or am I missing something ?

[dominic]

If the flat is share of freehold (meaning you will own a share in the company - together with the other lessees - which owns the freehold), then usually extending the lease is done free of charge voluntarily, as it is in every lessee's interest to do so.

There is a statutory right to extend, but this may be academic, if the situiation is that the freeholder (being the lessees acting through a company) are willing on the above basis.

[norroy]

But in the example I gave above it would not be in the interests of the other leaseholders, as they already have long leases.

Surely B and C would be within their rights to insist that the freeholder is fully compensated for granting an extension to A's lease ?

[dominic]

May be worth reading the articles of association of the FH to see whether lease extensions are mentioned there.

But yes, I miread your last post, in that case they would be entitled to charge market rate - whether they do is another matter, they may be happy to extend it free of charge.

[leaseholdanswers]

Commercially the freeholder company would be right to charge the full cost of extension using the 93 Act as a basis. The company may well have loans made by the members to purchase the freehold, as they may have had to pay in the price, for the loss, by the old owner, of income from future lease extensions.

At 71 years left it is an asset to the company and it and any such loans should be in the companies accounts.


If not, you may well be paying the company as a leaseholder and assuming you have joined the company then as a shareholder, you get a share back.

However your lovely neighbours may well be happy that if you meet all legal costs then the price might be a £1.