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Advantages to purchasing Freehold

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Andy46
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Advantages to purchasing Freehold

#388921

Postby Andy46 » February 22nd, 2021, 9:50 pm

Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks

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Re: Advantages to purchasing Freehold

#388926

Postby richlist » February 22nd, 2021, 9:57 pm

It depends on what the freeholder already provides, how much you pay in services charges, what you are going to spend to cover the same etc etc.

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Re: Advantages to purchasing Freehold

#388929

Postby Mike4 » February 22nd, 2021, 10:09 pm

Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


I suspect you don't, as there is no such thing as the freehold to a flat.

There is however the freehold to the whole building, and my guess would be you are being offered a part share in the ownership of the freehold of the building which has had many leaseholds carved out of it, one being yours. Or even more likely you are being offered a share in the ltd company owning the freehold.

A major advantage of the leaseholders collectively owning the freehold to their building is they get to control who does the maintenance of the common parts - drains, roof, foundations, car park, boundary fences etc. Once you get control of this you are no longer at the mercy of a (perhaps future) avaricious freeholder who takes every opportunity to shaft the leaseholders in any way possible. Don't ask me how I know.

I'd grab with both hands the opportunity to buy a share of the freehold at such a trivial sum, before someone else without your interests at heart buys it instead.

(Edit to add the last para.)
Last edited by Mike4 on February 22nd, 2021, 10:12 pm, edited 1 time in total.

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Re: Advantages to purchasing Freehold

#388930

Postby james51 » February 22nd, 2021, 10:11 pm

I am in a similar position. The terms of the lease on the property (a detached house) say that I need to get the freeholder's permission to change the exterior of the house (e.g. build an extension) in addition to planning permission. That could be quite inconvenient, as I have no idea what criteria he would apply for accepting or not. The annual cost of the lease is trivial and there are no service charges.

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Re: Advantages to purchasing Freehold

#388931

Postby Mike4 » February 22nd, 2021, 10:18 pm

james51 wrote:I am in a similar position. The terms of the lease on the property (a detached house) say that I need to get the freeholder's permission to change the exterior of the house (e.g. build an extension) in addition to planning permission. That could be quite inconvenient, as I have no idea what criteria he would apply for accepting or not. The annual cost of the lease is trivial and there are no service charges.


If a person more avaricious than me was your freeholder they might be thinking of all manner of ways to make money from you. E.g. charging you say 10% of the projected build cost of any proposed extension. Or a few £k for permission to sell, or for an account showing your ground rent is paid up to date to show your buyer's lender. These are the ways freehold investors squeeze healthy profits out of the leaseholders trapped in their investments.

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Re: Advantages to purchasing Freehold

#388934

Postby AsleepInYorkshire » February 22nd, 2021, 10:21 pm

Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks

No.

AiY

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Re: Advantages to purchasing Freehold

#388938

Postby Mike88 » February 22nd, 2021, 10:28 pm

Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


If you have been offered to buy the freehold for the whole building which is also occupied by other leaseholders don't do it as you will end up with responsibility for maintaining the entire building and will also be stuck with chasing the remaining leaseholders for their share of management charges. Buying the freehold is only worthy of consideration if other leaseholders in the building collectively agree to purchase their share. If you are asking about buying the freehold for a single property disregard the above comments.

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Re: Advantages to purchasing Freehold

#388945

Postby chas49 » February 22nd, 2021, 10:42 pm

Mike4 wrote:
Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


I suspect you don't, as there is no such thing as the freehold to a flat.



The OP never mentioned living in a flat!

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Re: Advantages to purchasing Freehold

#388951

Postby Mike4 » February 22nd, 2021, 10:52 pm

chas49 wrote:
Mike4 wrote:
Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


I suspect you don't, as there is no such thing as the freehold to a flat.



The OP never mentioned living in a flat!


Good point! But nor did they mention it being a house.

Perhaps they could clarify?

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Re: Advantages to purchasing Freehold

#388953

Postby Mike88 » February 22nd, 2021, 10:54 pm

chas49 wrote:
Mike4 wrote:
Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


I suspect you don't, as there is no such thing as the freehold to a flat.



The OP never mentioned living in a flat!


The OP referred to a leasehold property. Isn't a flat a leasehold property?

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Re: Advantages to purchasing Freehold

#388955

Postby AsleepInYorkshire » February 22nd, 2021, 10:59 pm

chas49 wrote:
Mike4 wrote:
Andy46 wrote:Hi,

I live in leasehold property. The lease was for 999 years and has about 880 years left. The ground rent was set at £2.30 a year (it takes me a while to save up for it each year :lol: ) I get the offer to buy the freehold from the current freeholder for about £600 every year, is there any point whatsoever to purchase it? I'm never planning on extending the property btw.

Thanks


I suspect you don't, as there is no such thing as the freehold to a flat.



The OP never mentioned living in a flat!

You're correct. However, a leasehold period of 999 years usually applies to shared properties, namely flats or if you prefer apartments.

AiY

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Re: Advantages to purchasing Freehold

#388956

Postby mc2fool » February 22nd, 2021, 10:59 pm

Mike88 wrote:The OP referred to a leasehold property. Isn't a flat a leasehold property?

All flats are leasehold properties but not all leasehold properties are flats. In fact there was an uproar a few years back about developers selling houses with expensive leaseholds. https://www.which.co.uk/news/2019/06/leasehold-scandal-one-year-on-has-anything-really-changed/

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Re: Advantages to purchasing Freehold

#388958

Postby Mike4 » February 22nd, 2021, 11:05 pm

AsleepInYorkshire wrote:
chas49 wrote:
Mike4 wrote:
I suspect you don't, as there is no such thing as the freehold to a flat.



The OP never mentioned living in a flat!

You're correct. However, a leasehold period of 999 years usually applies to shared properties, namely flats or if you prefer apartments.

AiY


^^^This^^^

The 999 year long lease plus the low low premium being asked for the freehold screamed "1960s or earlier flat" at me. Come the 70s, leases were typically being written at 99 years instead. And with the recent houses being sold leasehold, the scandal is the freehold investors buying the freeholds from the builders wringing out the leaseholders by demanding tens of £k for the freehold.

Hence my totally unjustified assumption this was a flat.

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Re: Advantages to purchasing Freehold

#388961

Postby AsleepInYorkshire » February 22nd, 2021, 11:10 pm

Mike4 wrote:
AsleepInYorkshire wrote:
chas49 wrote:
The OP never mentioned living in a flat!

You're correct. However, a leasehold period of 999 years usually applies to shared properties, namely flats or if you prefer apartments.

AiY


^^^This^^^

The 999 year long lease plus the low low premium being asked for the freehold screamed "1960s or earlier flat" at me. Come the 70s, leases were typically being written at 99 years instead. And with the recent houses being sold leasehold, the scandal is the freehold investors buying the freeholds from the builders wringing out the leaseholders by demanding tens of £k for the freehold.

Hence my totally unjustified assumption this was a flat.

Behave :roll:

I suspect most of the "apartments" with this kind of leasehold agreement have local government support. Many schemes would not be viable without. Not all new builds are going to make a huge margin unless all stakeholders work to unlock value.

AiY

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Re: Advantages to purchasing Freehold

#388966

Postby mc2fool » February 22nd, 2021, 11:20 pm

Mike4 wrote:The 999 year long lease plus the low low premium being asked for the freehold screamed "1960s or earlier flat" at me.

Interesting deduction. :P More reliably, as the OP said they have 880 years left on their 999 year leasehold, we can fairly reasonably infer that the property (flat or not) was built in or before 1902. :D

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Re: Advantages to purchasing Freehold

#388968

Postby Mike4 » February 22nd, 2021, 11:26 pm

mc2fool wrote:
Mike4 wrote:The 999 year long lease plus the low low premium being asked for the freehold screamed "1960s or earlier flat" at me.

Interesting deduction. :P More reliably, as the OP said they have 880 years left on their 999 year leasehold, we can fairly reasonably infer that the property (flat or not) was built in or before 1902. :D


Yes that too! ... AND, the ground rent of £2.30 a year. Even had the OP not mentioned 880m years left on their 999 year lease, this £2.30 a year with no provision for inflation uplifts also screams 'very old lease' to me.

Edit to add: I once owned a freehold (Victorian) house upon which I paid a "rent charge" of £1.30 a year. I never quite understood how they came to be entitled to collect the £1.30 a year from me but collect it they did! This was in a tightly defined locality with perhaps 5,000 other all built by (I think) Suttons Seeds so I guess they all had the same provision. A useful income if you have the time and inclination to collect it.

I bought the house out of the obligation for the princely sum of twenty seven quids.

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Re: Advantages to purchasing Freehold

#388970

Postby mc2fool » February 22nd, 2021, 11:33 pm

Mike4 wrote:A major advantage of the leaseholders collectively owning the freehold to their building is they get to control who does the maintenance of the common parts - drains, roof, foundations, car park, boundary fences etc. Once you get control of this you are no longer at the mercy of a (perhaps future) avaricious freeholder who takes every opportunity to shaft the leaseholders in any way possible.

Leaseholders of a block of flats can actually do that even without undertaking Collective Enfranchisement (buying the freehold), it's called the RIght to Manage. (Which is not to say that collective enfranchisement might not be a good idea anyway.)

Yes that too! ... AND, the ground rent of £2.30 a year. Even had the OP not mentioned 880m years left on their 999 year lease, this £2.30 a year with no provision for inflation uplifts also screams 'very old lease' to me.

Indeed. :lol:

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Re: Advantages to purchasing Freehold

#388976

Postby Mike4 » February 22nd, 2021, 11:44 pm

mc2fool wrote:
Mike4 wrote:A major advantage of the leaseholders collectively owning the freehold to their building is they get to control who does the maintenance of the common parts - drains, roof, foundations, car park, boundary fences etc. Once you get control of this you are no longer at the mercy of a (perhaps future) avaricious freeholder who takes every opportunity to shaft the leaseholders in any way possible.

Leaseholders of a block of flats can actually do that even without undertaking Collective Enfranchisement (buying the freehold), it's called the RIght to Manage. (Which is not to say that collective enfranchisement might not be a good idea anyway.)

Yes that too! ... AND, the ground rent of £2.30 a year. Even had the OP not mentioned 880m years left on their 999 year lease, this £2.30 a year with no provision for inflation uplifts also screams 'very old lease' to me.

Indeed. :lol:


Curiously though, the OP also sees fit to mention he "has no plans to extend the property". This on the other hand, implies it would be technically possible to extend, which cannot be done with a flat. Therefore perhaps it IS a house after all. Or maybe a ground floor maisonette would fit all the criteria gleaned from his/her post

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Re: Advantages to purchasing Freehold

#388977

Postby JohnB » February 22nd, 2021, 11:47 pm

When I owned a 1960s flat the freehold was owned by a company all owners were members of, which made maintenance cheap, but we still paid ground rent to the successor of the builder. The OP needs to check just what they are getting for £600, but it seems good to eliminate a third party.

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Re: Advantages to purchasing Freehold

#388982

Postby pochisoldi » February 23rd, 2021, 12:12 am

A distinction needs to be made between "ground rent" due under the terms of a lease, and "rent charge" which may be payable on freehold land (sometimes also referred to as "ground rent" - especially in the North West of England )

A rent charge can be discharged by paying a fee which is a set formula - IIRC this recently worked out at somewhere around 16 times the "rent".

Don't ask me how you value the purchase of the freehold for a leasehold house. I'd visit the lease-advice website for more info, rather than assuming that the rules for flat lease extensions/freehold enfranchisement apply.


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