Lease extension on flat with known aggressive London freeholder ... any advice?

[w1dino]

We're buying a flat with ~90 years on the lease remaining in central London.

The freeholder is the Wellcome Trust who are known to be aggressive and have quite literally made a woman destitute through legal proceedings when she challenged her service charges...

Has anyone had any experience with the Wellcome Trust (a long shot) or any experience dealing with these large corporate freeholders whose main interest is of course to maintain and extract value from their property portfolios?

Are there any things we should be cautious about? The seller of the property is going to begin proceedings to extend the lease (at our expense) once we have exchanged.

Many, many thanks from a naïve first time buyer!🤗

If you are having to ask these questions now, in your shoes, no way would I buy. Why run the risk?

In any case, having been a lease holder in the past, I will never ever buy lease hold again. Charges for cleaning communal areas (Service charges) and block building insurance and charges to upgrade and refurb’ communal areas and windows etc were horrendous. They wanted £thousands.
This is just the tip of the ice berg.

Proceed with your eyes wide open and do your research. Caveat Emptor!

Agree. Read the clauses v v carefully. My friend backed out of a purchase of a Marylebone flat (Portman Estate is the freeholder). There was a weird clause enabling PE to demolish the building in 20 yrs (LHer would be compensated, of course). Plus service charge was 10k a year. Be wary of service charges, which will increase over time.

Well, the flat is the best we've seen within our budget and we've been looking for about 12 months now. Share of freehold seems hard to come by in London thanks to Grosvenor, Cadogan and the rest of the feudal oligarchs! In our case, the Wellcome Trust owns all the blocks - literally thousands of units.

Thanks for sharing your experience. Were you surprised by these fees? Did you or other residents ever contest these fees?

I've dealt with this on behalf of a large freeholder. Send me a message and I'll come back to you.

It will probably be fine but there are things to be aware of.
Make sure you have a solicitor who actually knows about enfranchisement. I dealt with tenant's solicitors who didn't and who made mistakes which then caused them massive problems.

@Shitfather the devil is definitely in the detail with this one!

Thank you, in this case it is a listed building (creates its own problems) but at least wholesale demolition unlikely. We have been told that the Wellcome Trust will try to issue a new lease with new amendments to favour the FH.

However, with lease extension being statutory I'm not sure how much the FH can enforce a new, amended lease?

Is it actually an oddity of UK leasehold properties that I could agree to purchase a lease, formally request a statutory extension of the same terms, but end up with a property with unknown/amended conditions added to the lease?😬

Well, the flat is the best we've seen within our budget

Because there's a catch.

I would work away

I used to be the PA to the MD of one of these mega freeholders. At my interview he asked if I lived in a flat. I said no and he said good because the job would put me off them for life.

In my experience, they are cast iron and don't budge. No sympathy, you're just a name to collect ground rent, service charge and insurance from. (The company I worked for had separate companies under the same ownership to cover everything for maximum returns.) They are quick to sue and charge for absolutely everything.

Lease extensions are crazy money so I hope you have a healthy budget.

Personally, I would walk away.

You know the issues . This could wreck your financial future . Don't buy a leasehold and if you can't afford freehold move as far out as you need to in order to be able to do so. Buying a leasehold property was the worst thing I ever did .

Not wishing to throw a spanner in the works, but have you checked other naice parts of London eg Maida Vale where you can find share of freehold flats?

OP it sounds like you need to see a specialist lawyer - but even then, they can't tell you what clauses will go in.

would the Leasehold Advisory Service have a standard guide for this?

I have extended a lease for a family member. I found it fine - just an individual freeholder - and it came out bang on the amount I was expecting.

however, my family member was shocked by it. He couldn't get his head around the "marriage value" thing. I told him at the start that the freeholder will likely get to charge what they want but he really struggled.

I thought big company negotiations were pretty normal in central, so there should be some precedent info you can look at.

Is there an APPG looking at leasehold law atm? Not sure if they have guidelines.

as a leaseholder myself, I would always say, bottom line is, you are at the mercy of a freeholder.

Once you have owned the flat for 2 years then you can go down the statutory lease extension route. Make sure this is done before you hit 80 years on the lease as then marriage value comes into play and it will be a lot more expensive for you. The freeholder may be a bit shirty but you have a statutory right to the extension don't let them try and get more out of you by going the informal route. They may say the extension is cheaper hut jack up your ground rent etc..... I'm am ex freeholder so know the tricks inside out.

I lived in a leasehold flat in Notting Hill for 12 years and actually it was fine. Mine was ex-local authority - but our charges (prob about £3000 a year for service and major works) were the same as my council tax in East Sussex now (my council tax in London was super low.)
The cleaning was great, and the communal garden was amazing - do you have a communal garden?

Admittedly one of the reasons we sold when we did was because there was about to be a £15,000 for new ventilation though....

If you already have doubts about the freeholder then it's best to avoid. Not only because it may cause you issues later on but it will also put off other buyers if you want to move. The property market is taking a downturn so soon you will find other good ones that are eager to sell within your budget.

I had a leasehold flat in outer London with a known aggressive leaseholder - sold after getting nowhere with the lease extension and losing almost 20% of what I paid for it 3 years earlier, leg it now and expand your search horizons.

Hello everyone, thank you all for your comments. This has been incredibly interesting and enlightening.🤗

We have a specialist lawyer who is looking into the statutory process but we will expand our search to include share of freehold in the meantime.

What a farce this whole leasehold malarky is...

OP what’s your budget and what are you looking for?

I’m in the process of buying in C London also and your post has given me much to think about re leasehold flats. This makes for sobering reading and accords with PPs thoughts on these bodies behave.

www.leaseholdknowledge.com/wellcome-trust-spends-114000-on-lawyers-to-defeat-onslow-square-leaseholder-in-6000-dispute/

I didn’t know the WT was a big freeholder. I only know them as a benevolent body that funds research in my field. I now know how they pay for such benevolence!

@Shitfather

Yes, this was a red flag for us but I haven’t yet found any other public reports or case law showing WT to be a bad actor in a statutory lease extension. It doesn’t mean they don’t exist.

London property is only ~3% of their investment portfolio.

Don't do it.

You should not agree to pay for the lease extension. The seller should have done that themselves before putting the flat on the market.

They are manipulating you by expecting to exchange first before they start the process.

Also it is likely you will end up with high services charges, ground rent and a freeholder that will charge you ''management fees'' as part of your service charge but will be rubbish at maintaining the property. These service charges also rise sharply all the time and you have no control on the money spent on maintenance and repair.

Leasehold is truly a relic of feudal times and you should really try to avoid it at all cost.

I would move to a more affordable area where you can afford a flat with a share of freehold and where the building is managed by residents, or where you can afford a small house.

It's a buyers market so you hold all the cards, I would offer (a higher price) but for the extended leasehold interest and put the onus on the seller to extend their least at their expense and risk, otherwise walk away and find a flat with a lease ideally of over 125 years. If it is getting close to 80 years they will be desperate to sell.

Nothing to be afraid of. As this isn't an area you have knowledge of then get an property lawyer. Extend Statutorily, which is what your seller is starting by assigning the notice to you.

Read the lease and your report on title properly. Book an appointment with your sol to go through the report on title.

When i had to extend my lease with a known bad freeholder, I went through a solicitor to protect me and negotiate.

We are currently selling a flat with the condition that the lease will be extended (currently 86 years left) before exchange. The buyer paid for the extension on top of their offer.

It has been a pain for us and is slightly delaying exchange. But if I was the buyer I would do it that way.

Will your leaseholder not do a voluntary extension?
Have you had a valuation/ quote for the extension?

Leaseholders have a statutory right to extend their leases. If enough leaseholders cooperate, they also have a statutory right for collective enfranchisement.

I've had to extend a lease with an absent freeholder, by going through the tribunal process. It was boring and took about 6 months, but I got the extension at a price that was calculated in accordance with published valuation tables. There was no negotiation or haggling required, so the aggressiveness of the freeholder doesn't really apply. To be honest, they only have one negotiating gambit - which is that they ask you to pay more for the extension than a tribunal would require, in return for getting it done quicker and avoiding the solicitor's costs. So maybe an extra £1k or so. You can go online to look at what the extension will cost - as long as you factor that in to your purchase price and have the cash available when needed, there's reason not to buy this flat.