Help... Getting ripped of for the freehold!?

[lposkey]

Hi there,

My boyfriend and I are first time buyers and have recently had an offer accepted on a one bed flat in East London- the flat is valued at £350000, paying ground rent of £60 annually. Our problem is that the lease is 93 years (not too short I know) and we want to extend the loft so have recently been enquiring about buying the freehold outright- we've heard horror stories of evil freeholders charging £10000+ just to get the right to convert the loft, so since we might have to extend the lease in the near future anyway buying the freehold seems to make sense.

The freeholder has offered us the freehold for both our flat and downstairs for £14500 and we were wondering if this is a bit steep? From some estimates i've done online (MSE, Lease.com) it seems to be around £5-£6000 over what it should cost. We have absolutely NO experience of this and were wondering if anyone had any advice for us? The freeholder has said we can pay for a valuation surveyor and his legal fees if we want to negotiate, but I just feel we're on very unfamiliar ground here.

Thanks

For downstairs too sounds a bargain. Is it a converted house? The average is for purpose built blocks of flats.

Oh... this is reassuring! It's a terrace house converted into two flats.

If you're getting the whole freehold it's a steal! You would have responsibilities to downstairs though.

Agree it doesn't sound crazy money.
But you need to understand what it means to own the freehold for the other flat too. You will need to arrange with them that they pay a fee to you and in return as the freeholder you look after the communal areas, building insurance, care of the outside and structure of the house etc. This may be a ball ache if they aren't reasonable people/ if major works are needed.

I'm not sure the freeholder can offer it to you without offering it to the other leaseholder too - you might want to investigate. As others have said, it doesn't sound overly expensive. Is the loft currently demised to your flat and you want to extend it and would therefore need f/h permission to do that or is it not included in the lease of your flat and you would need to buy it from the f/her? If the downstairs neighbour does want to share the freehold you may find that you still need to come to an agreement to extend the loft if it isn't demised to your flat (unless you can come to some sort of tit-for-tat arrangement that they could, for example, build an extension into the garden if there is one).

Thanks for the advice everyone. The downstairs flat is also currently up for sale, but we're hoping to sell a share of the freehold to the new owners once they're in/if they're interested for a fair price. The loft isn't included in our lease, so it does make the freehold that bit more attractive...

Superb timing - definitely buy the f/h, vary your lease to give yourself the loft and permission to extend, then sell a share to downstairs (if they want it) .

Sounds really cheap. What's the catch?

Buy it! That is an absolute bargain, I promise you. More than ten years ago we purchased the freehold of an entire converted house in north London for 12k when we bought the top floor flat and last year we sold it to the joint leaseholders for 42k (the ground floor flat's lease had gone under the marriage value, hence the jump in value). On the flip side, our second flat was leasehold and we had to pay the freeholder £10,000 to convert the loft. You'd be mad not to buy it.

I don't know what the price of the freehold should be as I didn't buy mine separately, but I can't resist commenting as I own a flat that's half of a house, and I also own the freehold for the whole building. (The fact that I have a lease and own the freehold is a bit confusing).

I'm very glad I have the freehold (for my flat at least), as I don't have to worry about service charges - some sound ridiculously expensive and someone is clearly making a large profit out of them.

I do have the responsibility of arranging the buildings insurance every year (and collecting my upstairs neighbours' share of the bill). I believe I'm also in charge of arranging maintenance work. I always make these decisions jointly with my upstairs neighbours (including the choice of insurance provider, if they want to suggest anyone) and I'm lucky that they've been very reasonable and there have been no disagreements between us.

The biggest pain was finding a mortgage provider who'd lend on a freehold flat. Only two were interested, and one pulled out after realising it was a conversion rather than purpose built. Thank goodness for Natwest!

But your flat isn't a freehold flat - it sounds as if you own the freehold for the building but your flat is regulated by the lease. It shouldn't be any sort of barrier to getting a mortgage . A freehold flat is a different entity (it means the flat isn't governed by a lease and it becomes difficult to enforce repairs on common areas such as the roof).

There is a formula for working out the cost of the FH. Takes into account length of lease, ground rent, value of property (IIRC, having been through this.) Have a Google and see.

If it's felt that a FHolder is asking too much, it can go to a tribunal, which will decide. The FHolder can't just demand what they like - or rather they can demand, but that doesn't mean the Lholder is obliged to pay.
We bought a freehold with various complications, largely because of a supposedly absentee freeholder (he wasn't, just pretending to be until he thought there was going to be money in it.)
We used Ringley Legal, who are specialists in this sort of thing. It still took a long time, though - it went to a tribunal whose word was final. We first tried a High St solicitor who said he knew the ropes, but turned out to be utterly useless.

Should add, we were buying the FH of two purpose built maisonettes comprising one building. The owner (LHOlder ) of the other didn't want to buy her half.
The reason we were anxious to buy was because a (supposedly)! absentee FHOlder had caused severe problems during the purchase.

At the time the property was valued at about £260k IIRC, maybe a bit more, and we paid about £11k for the FH (as decided by tribunal) plus legal fees.

Hold fire!!! There is a government consultation underway where they are looking at changing the legislation re leases and the sale of freeholds.

Looks as thought the freehold redemption market will die.

It's unclear exactly what is going to be introduced but I would check it out before you part with your cash.

My understanding is that the consultation will look only at what have been dubbed "rip-off" leaseholds (eg, those that have ground rents that multiply every few years making them unaffordable quite quickly).

There was a court case last month in which campaigners tried to have the formula by which leases are valued recalculated to make it cheaper for leaseholders to extend. The judge ruled against them.

While I can see a future government (not one that is trying to hold its party together and deal with Brexit) wanting to curb freehold excesses, I can't see it happening any time soon and I think it is very unlikely that the freehold redemptions are going to die out. At most, I imagine the process to extend a lease or get control of a freehold from an unscrupulous landlord will be simplified but, considering that some very wealthy people own extensive freehold interests, it is unlikely this would be done without quite a lot of lobbying and court action.

Lalalonglegs, what you say about freehold flats makes sense and I wish I'd known that at the time. I think I was badly advised by the keen but inexperienced young estate agents, who kept calling it a freehold flat. And the solicitors' firm they recommended turned out to be terrible.

I was baffled by the way mortgage firms allegedly saw the freehold as a liability. I certainly didn't and still don't. But I suspect now that the estate agents confused the mortgage advisor.