Buying freehold reversion - breakdown of costs

We're closing in on having two years in our leasehold house (from December) which means we can look at buying the freehold reversion.

Our ground rent is negligible (£4 a year) and the lease has around 850 years left to run BUT our freeholder was a proper pain for our vendors when we were buying and has been a pain about insurance for us (all well documented on other threads). So, all in all, when/if we come to sell, we'd rather be in the position of offering it freehold and not scaring anyone off.

Now, I've been putting a bit by each month to cover costs but I'm still a bit unclear as to putting even a ballpark figure on the costs. As I understand it there's

a) The value of the reversion itself - which is up for negotiation but a 'rule of thumb' is that it's 15-30 x the ground rent (so max £120)

b) My legal costs - looking at the original conveyancing costs and taking off searches, stamp duty and things budget maybe £500? Perhaps that's too optimistic.

c) The "landlord’s reasonable legal and surveyor’s cost"

Will the landlord's 'reasonable' legal costs be around the same as my own? Who defines reasonable?

What's the surveryors cost? Does the landlord get a homebuyer's suvery?

Anyone with experience buying their freehold with any insight on the costs of doing so?

Let's start with the Leasehold Advisory Service website. It provides a lot of useful information.

See http://www.lease-advice.org/advice/find-the-right-information-for-you/?step-option=62

As to your questions:

a.

Yes, if (as in your case) the unexpired term is long.

b.

(1) You do not pay Stamp Duty; that applies only to Stocks and Shares.

(2) You also do not pay Stamp Duty Land Tax; that never applies unless the price exceeds £40 000, and often applies only if he price exceeds £125 000.

(3) Your own solicitor's legal fees etc. should rarely exceed £500 inc. everything.

c.

L's fees should be less than yours as there's less work for L's solicitor than for yours.

However, you as T have no legal right to challenge L's fees (solicitor/valuer) unless you're using the First Tier Tribunal.

Thanks Jeffrey - informative as usual.

What's the purpose of the reversioners survey? Surely it's not like the homebuyer's one you get when purchasing? What does it matter to the freehold if the chimney needs pointing, or the sealant has gone round the bath?

or is the survey in this case just to check the house is there, and hasn't had another built on the the land and so forth?

What's the purpose of the reversioners survey? Surely it's not like the homebuyer's one you get when purchasing? What does it matter to the freehold if the chimney needs pointing, or the sealant has gone round the bath?

 

or is the survey in this case just to check the house is there, and hasn't had another built on the the land and so forth?

No and no (respectively).

You see, it's not a survey at all- but a valuation of just the freehold reversion. The website explains more.

I see, thanks again. 'Survey' in relation to houses had me adding 2 and 2 and getting 5.

I'm in almost exactly the same situation as yours, & in the process of buying the freehold after serving Notice of Claim. Mine is shaping up to look like the whole lot will cost me approx £1000. About £500 for my solictor and about £500 for their side - cost of freehold & their fees included. Be prepared to negotiate and don't accept their first offer, it'll be way too high.

One regular problem is that the legal fees involved in referring a purchase price dispute (to the First Tier Tribunal) usually exceed any potential saving in the price. You see, the FTT differs from civil courts; they generally allow the wining party to claim all costs against the losing party, whereas the FTT cannot make such a costs order.

I've just completed this process myself. Agree with the comments already made but would add that in my case the freeholders quoted costs significantly higher than mine. I think my solicitors fees came to something like £375 and they asked for £1200. I'm fairly sure (and it would make sense) that they work out what it will cost you to go to the FTT and provide an offer based on that.

I've just completed this process myself. Agree with the comments already made but would add that in my case the freeholders quoted costs significantly higher than mine. I think my solicitors fees came to something like £375 and they asked for £1200. I'm fairly sure (and it would make sense) that they work out what it will cost you to go to the FTT and provide an offer based on that.

Yes- although the deviousness re legal fees does not benefit the freehold reversioner, only its solicitor.

Just to go slightly off topic...what does a leaseholder get out of holding leases

In my case the GR is £6.50 the lease has 820 years left

They send a bill out every year

When sending a bill exceeds the GR amount what will they do?

It must be close now to exceeding income?

Just to go slightly off topic...what does a leaseholder get out of holding leases

In my case the GR is £6.50 the lease has 820 years left

They send a bill out every year

When sending a bill exceeds the GR amount what will they do?

It must be close now to exceeding income?

A leaseholder gets a house! You seem to be asking "What does a freehold reversioner get out of holding freehold reversions".

Answer:

1. Ground rent income.

2. (Sometimes) Insurance commission or non-compliance penalties.

3. (Occasionally) consent fees for alterations.

4. (Ditto) Windfall profits on enfranchisement [house or whole block of flats] or leasehold extension [individual flat].