[Finance] Another query re lease extension.

[Binney on acid]

I am the freeholder of a block of 4 flats in Brighton. It's been a pain in the a$$ for the past 30 years. I've never made any money out of it, and the owner of one of the flats has given me nothing but grief since she bought the flat eons ago. Her executors are selling the flat. It has 64 years left on the lease, and the new purchaser wants a lease extension.

I know that Labour are in the process of drastically modifying freehold law. I wonder where I stand here. Getting a decent price for a lease extension would compensate me for the years of hassle that I've had from the current owner and her entourage. where do I stand here ?

 

[Official Old Man]

I'm on the opposite side of the fence, so to speak. One of my shops is in an old block of 2 shops and 13 flats. I have to pay a percentage of all repairs, and there are lots of them. On average it's around £5K a year per leaseholder that we all have to pay on the upkeep of a 200 year old building. The landlord pays zero towards this ( he does have a flat in the block so pays his %). What I'm getting at is are you sure you have to pay for the repairs or does the 4 flats have to pay?
My landlord is sitting on a block worth around a £million that costs him £0 a year in upkeep.

 

[Springal]

Leasehold reforms become law

The Leasehold and Freehold Reform Act has become law today.

www.gov.uk

Might help ? Suggest you appoint legal expertise or similar

 

[Wes Tupper]

As I understand it, if you agree to a voluntary leasehold extension before the new legislation comes into effect, the leaseholder will be responsible for meeting your legal and valuation costs.
If you decline the lease extension request now, the new purchaser will have a statutory right to extend the lease at the earlier of a) two years after the purchase date and b) the date the new legislation comes into force.
I take it that the new purchaser didn’t get the seller to trigger a statutory lease extension prior to completion.
In all cases the extension price has to be agreed mutually or, failing that, set by a tribunal. There are online calculators available to give you an idea of the extension price.
And, yes, obtain authorised legal advice at an early stage.

 

[beorhthelm]

if you own a freehold, not got money out of it and getting grief, not doing it right. idea of holding on to freeholds was to have an ongoing income stream.
sounds like this one lease holder is motivated, so offer a sensible price and extend lease. after thats resolved, offer terms all leasholders to buy out the freehold and get out of it.

 

[Wes Tupper]

if you own a freehold, not got money out of it and getting grief, not doing it right. idea of holding on to freeholds was to have an ongoing income stream.
sounds like this one lease holder is motivated, so offer a sensible price and extend lease. after thats resolved, offer terms all leasholders to buy out the freehold and get out of it.

Might be difficult to get any value for the freehold if all leaseholders extend, as the flow of ground rent will have dried up, but getting out completely might indeed be the best option.
Meant to add in my previous post that the impending removal of marriage values from the calculation of lease extension costs will potentially reduce the cost of extension. Another reason for getting it done now, although leaseholders will no doubt negotiate on the basis that marriage values are shortly disappearing.

 

[Binney on acid]

I own flat 3, and my daughter owns flat 1. I get £50 a year ground rent from the flat 4, which is in the process of being sold, and £150 per annum from the owners of flats 2 & 4 for running the maintenance account. This doesn't cover my time or travelling costs. I don't charge my daughter or myself to administer the account. I'm not in a hurry to sell my flat, as I'll get clobbered for CGT. If I sell the freehold to the bloke that owns flat 2, and is negotiating to buy flat 4, he'll have an additional storey comprising of 2 flats built. This will de-value both my flat and my daughter's flat. All the time I retain the freehold, I am preventing the owner of flat 2, who is negotiating to buy flat 4, from creating flats 5 & 6 on the second floor that he will add onto the building.

 

[dsr-burnley]

I own flat 3, and my daughter owns flat 1. I get £50 a year ground rent from the flat 4, which is in the process of being sold, and £150 per annum from the owners of flats 2 & 4 for running the maintenance account. This doesn't cover my time or travelling costs. I don't charge my daughter or myself to administer the account. I'm not in a hurry to sell my flat, as I'll get clobbered for CGT. If I sell the freehold to the bloke that owns flat 2, and is negotiating to buy flat 4, he'll have an additional storey comprising of 2 flats built. This will de-value both my flat and my daughter's flat. All the time I retain the freehold, I am preventing the owner of flat 2, who is negotiating to buy flat 4, from creating flats 5 & 6 on the second floor that he will add onto the building.

Easiest way would be to sell the lot, two flats plus the freehold, at a premium. Obviously there would be CGT on your flat, though not your daughter's, but you should get excess profit because you have the flat 4 man over a barrel, which should ease the pain. And you'd be free of the whole schemozzle.

(If, that is, your daughter wants to move.)

 

[Herr Tubthumper]

I am the freeholder of a block of 4 flats in Brighton. It's been a pain in the a$$ for the past 30 years. I've never made any money out of it, and the owner of one of the flats has given me nothing but grief since she bought the flat eons ago. Her executors are selling the flat. It has 64 years left on the lease, and the new purchaser wants a lease extension.

I know that Labour are in the process of drastically modifying freehold law. I wonder where I stand here. Getting a decent price for a lease extension would compensate me for the years of hassle that I've had from the current owner and her entourage. where do I stand here ?

I own a freehold of a block myself. I have two pieces of advice.

1) Appoint someone else to manage the freehold. I can recommend Ellmans in Hove. My view is that owning the freehold is not to make any money but more to control the maintenance of the building. Occasionally you will get a small windfall from a lease extension.
2) Get a solicitor to administer the lease extension. Something to consider is the leaseholder can force a lease extension and if you ask for “too much” can force it to a tribunal. I understand there’s a standard formula and my solicitor used this, and added a bit on top but not too much to force a tribunal. I recommend Dean Wilson.