Opportunity to buy share of freehold. Should I?

[EddieJT]

I own a leasehold rental flat in a building of 4 flats, with 91 years left on lease.

The freeholder is responsible for and does nothing (no maintenance, service, insurance), he just takes a ground rent of £50 per year. As tenants we all do our own maintenance and repairs and arrange our own insurance. There is no communal area.

I have just received notice that freeholder has made freehold available to buy to the 4 flats. He wants £55k.

Now I'd like to purchase share of FH, but at best part of £14k (£55k split between 4) I'm not sure it's worth it, especially since the freeholder has very little influence over things anyway. Worst they can do is increase the tiny ground rent, I'm guessing?

Also, I suspect the 4 flats all have different individual lease lengths. How does this work when splitting total freehold cost (£55k)? Is it the done thing that those tenants with shorter leases contribute more?

If us tenants don't buy share, and the freehold goes to auction, can the new freeholder make changes to lease, like start to control insurance, enforce maintenance? Currently the freeholder is not responsible for any of this. As said above all the current freeholder does is take £50 ground rent per year. He is not responsible for anything.

Any advice appreciated please.

Edited by EddieJT on Saturday 29th July 12:47

[EddieJT]

Should add that I intend to sell this flat in 4 years.

[bobtail4x4]

you WILL regret not spending £14k if a speculative company buy the freehold,
they can raise the fees significantly.

[FiF]

bobtail4x4 said:

you WILL regret not spending £14k if a speculative company buy the freehold,
they can raise the fees significantly.

Particularly in view of this comment "If us tenants don't buy share, and the freehold goes to auction," which I take to mean that's been hinted or informed will happen.

Might be worth knowing EXACTLY what your leasehold agreement says.

Also read up on Right of First Refusal

[7184c]

speak to your neighbours and gauge their opinion. Chances are someone will be difficult and can't see the bigger picture or doesnt have the money.

I would go back with a counter offer for a quick deal, say £40k, you could enfranchise the lease as another option but end up paying a st load in fees.

Is there land around/roof space that can be developed which would make freehold appealing to investors.

[smckeown]

Assuming you want to keep the property for more than a few years, you'd be an idiot to no but the share of the freehold. How much do you think the a lease extension will cost in the future in comparison?

[Yipper]

Sounds like they are overcharging.

Buy the freehold. Negotiate the price down. Extend the lease asap.

Read this:

http://www.moneysavingexpert.com/mortgages/buy-fre...
http://www.moneysavingexpert.com/mortgages/extend-...

[EddieJT]

Thanks all for the input.

I plan on selling this flat in 4 years, by which time there would be 87years left on the lease. Extending the lease to 99years to help with sale would cost significantly less than £14k, so I'm not sure of the benefit of buying share of FH.

Anyway, as has been said, I'd be surprised if all the neighbours had the means to contribute.

[carreauchompeur]

Your short term plans probably don't make it viable to buy, but hat if everyone else buys in-where would that leave you?

[Sir Bagalot]

What does your lease say about the ground rent? Any new freeholder can not change this without your permission.

A new Freeholder can introduce a service charge, and also a new loading on items. For example they can purchase insurance and add an admin fee/surcharge before passing it on to you.

£14K? You don't say how much the flat is worth? If it's worth £45K then £14K is a lot. If it's worth £400K then £14K is a small amount. On top of that £55K you also have their legal fees to pay.

You need to now the other lease lengths and ground rent charges/increases to establish value. Only because they want £55K doesn't mean it's worth that.

Also bear in mind saleability. If I was buying a flat with a 87 year lease then I'd be deducting £10K from any offer to buy an extension

[TA14]

Yipper said:

Sounds like they are overcharging.

Buy the freehold. Negotiate the price down. Extend the lease asap.

Read this:

http://www.moneysavingexpert.com/mortgages/buy-fre...
http://www.moneysavingexpert.com/mortgages/extend-...

I don't know why this post has been ignored. The OP has 91 years left on his lease, the freeholder wants 280 years rent for the freehold, from the links above the freehold is valued at 90 years rent or £4,500. Conclusion: good post by Yipper.

[Sir Bagalot]

TA14 said:

Yipper said:

Sounds like they are overcharging.

Buy the freehold. Negotiate the price down. Extend the lease asap.

Read this:

http://www.moneysavingexpert.com/mortgages/buy-fre...
http://www.moneysavingexpert.com/mortgages/extend-...

I don't know why this post has been ignored. The OP has 91 years left on his lease, the freeholder wants 280 years rent for the freehold, from the links above the freehold is valued at 90 years rent or £4,500. Conclusion: good post by Yipper.

Depends on many things. FH on where we own was eventually purchased for 20 x annual ground rent.

Ground rent on one place may be £10pa, whereas a flat in the same block many be £200pa. Length of existing leases also needs to be taken into account.

[EddieJT]

Good point guys.

Without any confirmation yet, I suspect 2 of the 4 flats have leases much shorter than my 91 years. This may explain the perceived high cost. Which leads me to ask is it expected that those flats with shorter leases should contribute more?

[EddieJT]

Sir Bagalot said:

What does your lease say about the ground rent? Any new freeholder can not change this without your permission.

A new Freeholder can introduce a service charge, and also a new loading on items. For example they can purchase insurance and add an admin fee/surcharge before passing it on to you.

£14K? You don't say how much the flat is worth? If it's worth £45K then £14K is a lot. If it's worth £400K then £14K is a small amount. On top of that £55K you also have their legal fees to pay.

You need to now the other lease lengths and ground rent charges/increases to establish value. Only because they want £55K doesn't mean it's worth that.

Also bear in mind saleability. If I was buying a flat with a 87 year lease then I'd be deducting £10K from any offer to buy an extension

This is the sort of thing I'm worried.

[Yipper]

EddieJT said:

Good point guys.

Without any confirmation yet, I suspect 2 of the 4 flats have leases much shorter than my 91 years. This may explain the perceived high cost. Which leads me to ask is it expected that those flats with shorter leases should contribute more?

Read TA14's good post above. They are mugging you off.

And read this, about the problems of not being in control of your own freehold:

http://www.dailymail.co.uk/news/article-4744946/Th...

[EddieJT]

Appreciated. Thanks for the links.

I'm going to ask the freeholder's solicitor if they will divulge the lease length on the other 3 flats.

I suspect they will be considerably less than my 91year lease, and will give me justification to argue I should not be paying an equal 1/4 share of the total freehold (since I have least to gain).

[TA14]

The other option that you may consider is to offer say £15,000 or £20,000 for the whole lot (i.e. all four freeholds) and then the other three would have to buy from you if they wanted to own their freehold.

[EddieJT]

Yeah, that's something I hadn't considered but would be interested in.

Otherwise, is it expected of me and the other 3 flats to get together and thrash this out amongst ourselves and try to come to some agreement with regard to buying the freehold?

[TA14]

EddieJT said:

Otherwise, is it expected of me and the other 3 flats to get together and thrash this out amongst ourselves and try to come to some agreement with regard to buying the freehold?

No, it's not expected, it's simply an option. I have a friend who did just that: lived in a block of four flats and bout the freehold for the lot. It can be difficult getting the others to buy their portion or agree to a roof repair as well as getting the agreement of the freeholder for some things and it makes it a lot easier if you are also the landlord.

[EddieJT]

Ok, just got confirmation of the lease lengths on the 4 flats:

The flats have the following leases:
95 years
91 years (mine)
91 years
47 years

So the 47 year one makes things interesting.

Edited by EddieJT on Thursday 3rd August 20:24

Edited by EddieJT on Thursday 3rd August 20:24