Buy freehold of a Leasehold property

by Readers Question

3 years ago

Buy freehold of a Leasehold property

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Buy freehold of a Leasehold property

I have a leasehold basement flat which is within a block of four flats. The freeholder of the block recently notified me of their intention to sell the freehold and will soon be initiating the formal process by offering the freehold to the tenants before selling on the open market. Buy freehold of a Leasehold property

I would appreciate your advice re the pros and cons for buying the freehold for my flat with others.

Thanks in advance for your advice.

Pat Hanson



Comments

Mark Alexander

3 years ago

Hi Pat

Expect to pay around 20 times the annual ground rent for the block.

You will probably need to appoint a freehold management company.

Major advantages are control.
.

Dear Ms Hanson,

We do encourage leaseholders to form a right to manage company to gain control of their block and to buy the freehold once they have been given the opportunity to do so. Before selling, the freeholder is legally required to inform the leaseholders of this first. You don't want a difficult freeholder buying the freehold!

The only con would be the costs which may be involved to buy the freehold. But it may be less than you think.

The benefits are numerous such as more control of your block, easy to extend or change terms on the lease which could also reduce the ground rent to peppercorn rent etc.

There are more advantages to it especially in the long term.

Kind Regards

Michael Barnes

3 years ago

You may also want to appoint an agent to handle the day-to-day management of the block (insurance, cleaning, repairs, knowledge of legal requirements and changes in the law).

Tony Lilleystone

3 years ago

Go for it if at all possible – hopefully your fellow flat-owners will all be prepared to join in and share the costs.
Some pro's

you can extend your leases to 999 year terms without having to pay premiums

you won't need to pay extortionate management charges which freeholders or managing agents often charge for collecting ground rent and service charges

you will have much more control over expenses such as insurance and building repairs

flats sold with 'share of the freehold' seem to be more attractive to buyers

Some con's

someone still has to organise building management – arranging building insurance, getting maintenance and repairs done, etc. etc. as well as collecting payment from other owners so it can still be worth appointing reputable managing agents to do this for you.

flat-owners sometimes think that owning a share of the freehold means not having to pay for insurance and building repairs so it can be difficult to get them to pay their share

you need to get agreement from other owners to carry out works

If you go ahead get legal advice on the best method of owning the freehold. As there are 4 flats you could buy it jointly in the names of each of the flat-owners (you can have up to 4 names on the title) but in that case it would be highly desirable to have a trust deed setting out the ownership arrangements. Also when one owner wants to sell their flat with their share of the freehold they would have to get the other three owners to sign the transfer, which can be a bit messy.
Alternatively set up a company limited by guarantee and buy the freehold in the name of the company. Company registration agents can set up a suitable company 'off-the-shelf' for a few hundred pounds, your solicitor should be able to organise this if required. Companies limited by guarantee have members rather than shareholders, and the company rules will provide that only owners of flats within the block can be members of the company so there is no need for anyone selling their flat to get other owners to sign documents.


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