Offered the chance to buy a share in the freehold

[Chunk49]

Hi

Am after some guidance from those more in the know. I bought a flat about 18 months ago which is part of a purpose built development of a few blocks of flats, which were built in 1997. My leasehold is a 900+ year lease. As I understand it, the freeholder is going to sell the freehold and the current leaseholders have right of first refusal to buy the freehold (i.e. set up a company which will own the freehold and each leaseholder who participates will own a share in that company). The estimated cost of purchasing my freehold is around £5,000 (although this is not currently a firm figure). From initial communications it looks like a majority of the current leaseholders have expressed an interest in purchasing the freehold.

I suppose my main question is should I purchase the freehold and if so why i.e. why is that beneficial for me going forwards?

Would it be the case that I then wouldn't need to pay yearly ground rent? At the moment the ground rent is £350, so it would take like 15 years to reap that benefit if it is one.

Would owning the freehold increase the value of my flat?

Any other comments, points to note or guidance would be really appreciated too.

Many thanks.

[Chunk49]

megaphone said:

How many flats in the block? Are there other blocks on the same estate? What is the service charge each year?

Think there's about 180 in the development (3 or 4 blocks). I think all on same estate. Service charge is currently £1800 a year.

Why?

[Chunk49]

megaphone said:

With that many flats it could become a PITA to manage. Who will manage the 'estate' once the existing freeholder has gone? How much could you potentially save on the current service charge? You may well end up having to pay a management company to look after everything, will they be any cheaper? All these things need to be thought about.

If it was a smaller block, say 6/8 flats then in can be a good move. Every owner is a part freeholder, someone steps up and 'manages' everything.

In your case I cannot see a great advantage, you have a long lease but will the potential savings in ground rent and service charges offset the cost of buying a share of the freehold and the potential aggravation?

The development is already managed by a mangagement company who seem very good and the service charge I pay is reasonable for London. I am not 100% sure but I think the management company is in some way separate from the freeholder and in some way connected to the residents.

Yes looking for advantages to me shelling out £5k was the purpose of the thread

[Chunk49]

Sir Bagalot said:

You might want to check the ground rent. Normally at that level they are rising, ie they double every 25 years.

Bear in mind it may cost you more as other leaseholders may not be interested. If not then your cost goes up but you will have a return on ground rent they pay.

I think these are very important points. I will check/consider.

Worst scenario would be I suppose for the new 'freeholders' (i.e. the majority of the tenants as it is looking like currently) then decide they want to crank up the ground rent year on year for those few who did not purchase a share of the freehold.

I also think the right of first refusal for the current leaseholders to purchase and doing so is likely in part a defensively motivated move i.e. no clear major benefit in purchasing a share of the free hold but the existing leaseholders doing so stops a more, shall we say, "commercially minded" company from purchasing the freehold.