Benefits of owning a share of a freehold?

by Readers Question

23:05 PM, 16th February 2015
About 4 years ago

Benefits of owning a share of a freehold?

Make Text Bigger
Benefits of owning a share of a freehold?

I own a flat in an 18 flat development. I get a good rental and the service charge is very reasonable. The flat next to mine is coming up for sale and I am seriously thinking of buying it. However, the freeholder has decided to sell the freehold and has offered the leaseholders first refusal. Benefits of owning a share of a freehold

Can any members enlighten me as to the benefits or pitfalls to buying the freehold?

I know the majority cannot afford it as it equates to £11,000 each. However, three leaseholders have shown an interest in buying the freehold complete.

Forgive me if I sound a little naive as I am new to the landlord business and only have the one property in my “portfolio”.

Regards

Gary



Comments

Joe Bloggs

11:16 AM, 17th February 2015
About 4 years ago

if you dont buy it, then in all probability some shyster will and your sc will no longer be at all reasonable!

John Simpson

11:58 AM, 17th February 2015
About 4 years ago

Firstly it depends how long you've got left on your lease as one of the main benefits is that as a freeholder you can extend it to however long you all agree to without having to pay. I'd imagine the cost of the freehold has had this t=factored into the price. However, thereafter you as a group of freeholders can charge other leaseholders who want to extend their lease but didn't buy into the freehold. Leases become problematical to mortgage (though not impossible) once the term drops below 70 yrs. So if only a few of you buy into the freehold and there's only say 67yrs left on the leases, although it'll cost you a fair bit to buy, there's a source of revenue to be had thereafter and the longer a leaseholder leaves it to extend their lease, the more you can charge.

The other thing is you can control maintenance costs once you've got control. So no more being tucked up with extortionate quotes for redecorating the outside, renewing the roof, mowing the gardens etc. Usually you form a management company although this will need running of course, and you get the quotes in rather than the freeholder who will often ask contractors to inflate estimates and get a kickback once the work's done and paid for by the leaseholders as part of their maintenance charge. You could be unscrupulous of course and do the same to the other leaseholders who didn't buy into the freehold!!! Plus if your freeholder is difficult to get hold of to sort things out, you're now in control of things.

David Aneurin

15:47 PM, 17th February 2015
About 4 years ago

I would always say - go for it It saves on time and other issues as you (i.e.) the leaseholders are in sole charge. I am a property manager and it much simpler if the management company is also the freeholder.
You make no mention of the ground rent and to give you an idea of whether the price you quote is realistic either get professional advice or there are a number of web sites with freehold calculators.
I have also found that where the freehold was not transferred/bought by the management company that the cost of buying the freehold increases in the future.
Once you have the freehold in theory the price of the flats should increase, but possibly not as much as you would think. Buyers are sometimes blind to the fact that they have to pay ground rent and do not factor that into the price..

John Walker

17:48 PM, 17th February 2015
About 4 years ago

Hi Gary,
Whatever you do ensure there is a proper management structure in place whereby all the future freeholders are legally bound to pay their due proportion of costs,
maintenance, repairs, insurance etc,

Bob P

20:50 PM, 15th February 2018
About 10 months ago

I bought the Freehold to my flat in May 2017. It is a detached building. My flat is over three garages and i own one of them. I assumed that when i became the freeholder, i would be able to purchase my own buildings insurance. However the management company that look after the estate where i live has said i am able to choose my own insurance provider but that they are responsible for collecting the premiums. Is this correct. I believe i should be free to do it myself but the management company are having none of it. Can i legally challenge their decision?

Puzzler

9:15 AM, 18th February 2018
About 10 months ago

Reply to the comment left by BOB PARKS at 15/02/2018 - 20:50
I think it depends what kind of management company it is, if a residents' Right to Manage then they can. If it's an agent then you can instruct them

Puzzler

9:24 AM, 18th February 2018
About 10 months ago

Yes you should buy the freehold, it will add value to your property. But get a good solicitor. LEASE will be able to direct you to one in your area.

Usual practice would be to buy it amongst those who can or want to in the form of a limited company in which each flat has one share. To arrange it so all flats eventually own one share, the next sale/purchase will take the purchase into account and the original purchasers reimbursed.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Variation of lease to rectify adverse possession?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More