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  • Leasehold Property

    Renew lease or pay more for freehold?

    Hi all

    I currently live in a converted flat. (House split into two flats). 

    Current lease: 84 years for both flats. No service charge and ground rent is very cheap.

    I have just got some quotes for the following:

    • Extend the lease: Approx 5-6k each
    • Obtain joint freehold with the other flat: £11k each.

    So basically double the cost to have share of freehold. Is it worth it? 

    We are planning on moving on within the next 5 years so also interested to hear whether selling with ‘share of freehold’ will fetch more than simply having a long lease. 

    Interested to hear your thoughts.

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    I assume if you extend the lease you will do so on statutory terms, an additional 90 years at a peppercorn ground rent, that makes the cost of the freehold appear expensive.  You may be able to find a calculator on the internet that will allow you to work out a value for the freehold, if not a surveyor that specialises in lease extension should be able to advise re the value of the freehold.

    The advantage of owning the freehold is should you wish to extend the property at some stage.

    You will need to keep the freehold separate from the leasehold perhaps by owning in a company.

    If you are planning to sell in the next few years I wouldn’t expect owning the freehold to add any value over a lease of 174 years at a peppercorn ground rent and a local estate agent should be able to advise on this.
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    Thanks for your input. That's my thinking as well, I don't think i'd gain much from getting the freehold. I won't be extending the property either.

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    To add to the above there may be circumstances where buying the freehold should be considered.

    I think I would check the lease to see if additional costs could be incurred if the freeholder wished to maximise their income from the leases - e.g.  is the buildings insurance arranged via them and can they take commission which would increase the premium.

    If you decide to let the property would a fee be payable?

    What are their charges for providing information to solicitors on sale?

    Is the other leaseholder interested in buying the freehold?

    Could you negotiate on the freehold price?

    What if they sold the freehold to a third party who wanted to maximise income?

    What type of property are the combined flats - detached, semi or end terrace - is there additional potential if you owned both, then you would want to own the freehold.  If you owned both is there potential to add additional units - loft conversion or extension.



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    Big thing is what costs etc do the Managing agents and or FH charge? Of course there is an RTM route, with a lease extension. I have same situation with one of my houses and the FH is very well known and ruthless, hence FH purchase. But if you're selling in 5 years extension might be better

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    Also, have you gone the official route, or unofficial?

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    I would never say no to a freehold! Without it you're forever at the mercy of both landlord & managing agent, obliged to do and pay whatever they want, to squeeze whatever blood out of you that they can, as your lease would have left you very wide open. Once you refuse the FH they can sell it to anyone who can employ whomever they want to manage your home. You will never have security or truly own the property in it's entirety or have the freedom of making all your own decisions. Owning the freehold will give you freedom, peace of mind & will be more valuable if and when you come to sell.

    The only thing I'd say is negotiate through surveyors, don't do any informal deals, to ensure you're getting a fair price, and try and drag it out if you can as government reforms may make it cheaper for you. But if you can't drag it out, don't risk it being sold to anyone else - buy it! Full ownership,what a dream!


    And please sign this petition

    https://petition.parliament.uk/petitions/238071

    Groups for your interest:

    https://www.leaseholdknowledge.com/

    https://nationalleaseholdcampaign.org/

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    Definitely buy the freehold if you can - you will need agreement of your neighbour to go down the official route or if they're not interested/can't afford it, then you would need to make a direct approach.

    It adds value to your property, you can grant new 999 year leases and there will be no ground rent to pay any more. You and your neighbour also have complete control over the management of the building, although the caveat is that you could have problems if you disagree over repairs, i.e. if you live upstairs and the roof leaks they might not be so keen on paying to repair the roof etc., so it's not without potential issues!

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    Thanks for all the comments.

    I think if I was going to live in the property I would likely buy the freehold however as I'll likely be moving within the next 5 years I can't see the appeal.

    The ground rent is hardly anything and the current freeholder seems ok.

    I may speak to a few local agents to see what price difference we would be looking at if we had the freehold vs long lease.

    I do have a question though. If we were to buy the freehold, I imagine we would need to instruct a managing company or would we self-manage? If so, how much would they usually charge?

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    Depends how many units in the block. With small, ie less than 4 there is usually a premium. With larger block over say 10 or more economies of scale would be used.

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    If there are just the two flats I think you could self manage.

    What a managing agent would charge would depend on what you want them to do but I’d expect a minimum charge of between £100 - £250 per flat.  Some also arrange the buildings insurance and obtain a commission on that.


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