Purchasing the Freehold of a House

[Jeffrey Shaw 90]

My property is leasehold and has just been sold to a cash buyer STC. My solicitor told me that due to the lease being under 70 years any buyer would probably find difficulty in obtaining a mortgage as under 70 years is considered a short lease. This did not concern me really as my buyer had the cash. The cost of buying the freehold is £4,200, this increases every year.

This leasehold business is a ticking timebomb in certain areas of Sheffield, many leaseholders haven't bought the freehold, don't intend to and eventually this will drive down the price of property in those areas when the properties become unmortgageable.

From my experiences of this I would think long and hard before buying into a leasehold property

The '70yr. rule' is not a law but a procedural step imposed by the Council of Mortgage Lenders. Not all mortgagees (lenders) insist on it.

 

What is a law is the '80yr. rule'. An enfranchising leaseholder's purchase price rises a lot due to 'marriage value' (effect of uniting the leasehold and the freehold reversion) but that value is NIL until the unexpired term dips below 80yrs.

[Hippogriff 10]

Well, after I put forward another proposal, they seemed to be genuinely considering it, escalating it to management for review. I received an email today which appears (to me) like the waters may have become muddied.

 

"Thank you for your email below with your suggestion for the freehold purchase price including the legal and valuation fee. We have considered it, however before we are able to agree on it, it has come to our attention that we own the Head Lease of the property and that there is a Superior Landlord (Sheffield City Council) who owns the freehold of the property. This means that there is another party to consider.

 

I appreciate that although this may take more time to consider, we are currently in contact with the Property Management Company that acts on behalf of Sheffield City Council. We would ultimately want to work out a reasonable freehold purchase price between ourselves, as we would need to dispose of our intermediate interest, and them theirs."

 

I'm guessing - as is always the case in life - that this late development means the price is likely to increase? I won't pre-empt anything, but my interest will simply disappear as the price rises.

 

I am somewhat surprised that they have only just discovered this fact of a "Superior Landlord"... I would really expect them to have known this all along?

[Jeffrey Shaw 90]

They might well have known, but you failed:

a. to have your solicitor investigate all relevant titles; and

b. to serve a Notice of Claim. SCC certainly will refuse to sell unless you go through the hoops.

[Hippogriff 10]

Oh well... at least I now know a real reason for the Notice of Claim. Let's see what happens... if it comes back as a red light, I can consider my options. If it comes back as a green light but more expensive, I can just walk away... nothing extra lost.

 

They now actually appear to be the ones who are doing all the professional paid-for work, and the running around... I'm just writing the odd email and watching with some bemusement.

 

Worst case scenario is that I find out acquiring the freehold is more trouble / cost than it's worth and I don't do it... having over 100 years remaining on it, then I can consider whether to sell up many years before the length of the lease becomes a real issue to a prospective purchaser. I'm certainly glad I'm now much less ignorant than I was before.

[Bloobell67 10]

Hi everyone - a very useful and interesting read, I am currently considering purchasing the freehold reversion of my semi and thought I'd see what others have had to say on the forum. Useful information as always! thanks to everyone for their posts.

 

I have some questions that I'm struggling with understanding before I go ahead with purchase and wondered if anyone had advice they could give me before I proceed?

 

House is £18 pa ground rent, around 194 years to go I think. I purchased the house in 2007 and I actually have the original leasehold document (as well as deeds etc. as the mortgage company didn't want to hold them!) and these seems to only talk (in olde ye english) about 'maintaining the property and boundaries' and permission needing to be sought for work done EXTERNALLY to the property.

 

Since then, the leasehold company Freehold Managers (Nominees) Ltd. have put up a website stating that permissions should be sought for internal alterations such as removing walls for e.g., laying a wood floor?

 

My questions are:

Can they do this? IE get me to pay them admin fee for permission to lay an internal wood floor?

Previous owners had a satellite dish on front of the house that I don't use - could they charge me for this? (or shall I just remove this quickly!)

What happens if I ask to purchase freehold reversion, will they have ways of checking or getting 'breach of contract' monies? (As general they have scary words noted on their rent demands)

What would be a reasonable freehold amount to pay?

 

FYI The company have sent me offers before to purchase freehold for £1275 plus costs, but have also played with this figure and sent 'special offers' - with one as low as £900. I'm now in a position to purchase but would like some advice before a London freehold company starts playing with my limited knowledge and scaring me into paying excess fees / post consent charges..

 

Can anyone give me a little advice please? thanks :-)

[Jeffrey Shaw 90]

Freehold Managers (Nominees) Ltd. is a regular source of friction. If it acquires one's freehold reversion, the first reaction ought always to enfranchise (= buy it out).

 

As to covenants, no. What the lease says is binding on you (unless overwritten by statute); what the company's website stipulates other is not binding at all. Do not pay anything that you're not obliged to pay!

 

To buy the f/r usually costs about 30 times the ground rent + L's legal fees. If you need more detail, send me a PM.

Edited July 25, 2012 by Jeffrey Shaw

[Bloobell67 10]

Hi Jeff

 

Thanks for your posting, I've just tried to send you a PM but I can't now see it in my 'outbox' - i don't know if this is because I'm fairly new and haven't made enough postings yet? Did you get this?

[Mr Chips 10]

Well, not quite. If it's a house [not a flat], the statutory right to enfranchise [= buy the freehold reversion] arises only after you've owned it for two years. Of course, your leasehold vendor might have two years' ownership already- so he/she could serve a Notice of Claim on F and then assign its benefit to you.

 

 

Yes, with two exceptions:

1. Pre-existing covenants on the freehold title. These are already binding on F.

2. New covenants that F imposes on you. Resist these. F has no such right unless they materially enhance the value of freeholds that F retains thereafter.

 

Hello Jeffrey (or other knowledgable people)

How would we know what the pre-existing covenants on the freehold title are? Are these the same as the conditions on the lease (like you can't keep chickens at the property)

 

Also, the form we have been sent talks of us purchasing the 'freehold interest'. Is this another way of saying 'freehold'?

Edited September 24, 2012 by Mr Chips
additional information addedd

[Jeffrey Shaw 90]

How would we know what the pre-existing covenants on the freehold title are?

The freehold reversion (f/r) covenants are those that already appear on the f/r title, i.e. not:

a. newly-created on enfranchisement; nor

b. identical to those in the lease (on the part of the leaseholder).

 

Are these the same as the conditions on the lease (like you can't keep chickens at the property)?

Not usually, no.

 

Also, the form we have been sent talks of us purchasing the 'freehold interest'. Is this another way of saying 'freehold'?

Sort-of. Purchasing the freehold involves you enfranchising, i.e. buying:

a. not only the f/r; but also

b. any other estates intervening between it and your existing leasehold.

Edited September 27, 2012 by Jeffrey Shaw

[lynette4444 10]

Hi

 

Im hoping someone might be able to help??

 

My husband and I are looking to relocate from London to Sheffield. We are curently in rented accomodation and were just about to consider an offer on a property in Renishaw when we discovered it was a leasehold property.

 

Im told by my estate agent this is something which is quite unique to Sheffield, ie a large proportion of properties are actually Leasehold versus Freehold. Is this correct? and what tends to be the impact?

 

In London Im familiar with the concept of a flat / house itself being leasehold, as a large proportion of properties are rented, but my sheffield estate agent tells me that in sheffield its common for you to own the bricks and mortar, but just not the land the house sits on and that 'ground rents' are usually low with no other major impact

 

Can anyone give us any advice on whether leaseholds are common in Sheffield, do they tend to be owned by the council / privately, costs associated, what questions we should be asking, what impacts we should consider ie does not being a freeholder prevent us from doing anything in respect of the house / garden itself.

 

We are checking the length of the leasehold as we speak, but any other advice would be greatly appreciated. We're first time buyers, so it all seems to be a bit of a minefield! My husbands view is 'there is no way on gods great earth we are buying a leasehold' (!!) as I think he's looking at this from a London perspective where there are often difficulties from a landlord perpective!

 

Many thanks

[Hippogriff 10]

I don't think it's unique to Sheffield, but I can vouch for the fact that it does seem to be quite common around here.

 

As to the impact, I would say that it's had none for me - but that doesn't stop me wanting to purchase my Freehold - a situation I've started with and that has become increasingly confusing and full of red tape as I've progressed (been an interesting learning experience) and it's not yet over. Costs have been modest, to date, but there are now two other parties involved in my situation, they'll all want a cut and their admin. fees at the end.

 

If you are going into this with your eyes open, then I would caution you against buying a leasehold house... unless you think you cannot avoid it, of course. I'm not saying that there's anything wrong with it, per se, but... if you have the choice, then choose freehold.

 

I'd not buy another leasehold house now that I know what I do, back in 2000 I simply didn't know any better and who thinks ~125 years in the future has any relevance to them at the time?

[Jeffrey Shaw 90]

I agree with Hippogriff.

 

lynette4444: if you're really so concerned about the house being leasehold, arrange for the leasehold vendor [if he/she's owned for at least two years]:

a. to serve a Notice of Claim on the freehold reversioner, at your expense; and

b. (on completion) to assign it to you, so that you'll then be able- without waiting two years more- to enfranchise (= buy the f/r).