If you have a share in the freehold of a flat, then does it matter how many years are left on the lease?
Tuesday, January 26th, 2010 at
5:45 pm
I’m considering buying a two bedroom flat in Acton, London that is in need of refurbishment for the asking price of £250,000 (seller won’t go lower), with a 1/8th share of the freehold which the seller has applied for so that “it is in the pipeline and will be included on completion of the sale”. The freehold company I’m told has been set up by the flat owners. There are 72 years left on a lease of 99 years originally. My solictor says 72 years is a low lease and could devalue the property although I do have approval from my mortgage lender. The estate agent says that the price takes into account the low lease (which i’m a bit skeptical about) and that it doesn’t matter how many years are left on it since I would have a share in the freehold. Would I have to consider extending the lease to avoid problems with selling after say a 25 year term? And are there other costs involved in addition to the legal costs of doing so? Is this a fair deal? Any advice would be much appreciated!
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Tagged with: 72 Years • Asking Price • Mortgage Lender
Filed under: flat mortgage
I don’t understand. It’s either free hold or leasehold. If when you complete the sale it’s free hold then the number of years left on the expired lease would be moot. Sounds a bit dodgy to me though, what if the freehold isn’t granted?
As you “own” 1/8th of the whole building, when the leasehold runs out, you and the other 7 freehold owners will decide whether to grant a renewal on the lease. As you are both the leaseholders and freeholders you would be unwise not to grant yourselves renewal on your leasehold. :o) It is likely that all the flats were built at the same time and so everyone’s lease will expire at the same time. 72 years is not especially low, anything over 50 years is fine from a mortgage/resale point of view. Perhaps you could place the offer on condition of extension of tenure.
72 years is a low lease anything below 75 yrs is normally un mortgageable and requires a lease extention. The share of freehold is totally seperate from the lease hold and gives you 1/8 control over the building if all the freeholders sat round a table they could extend the lease’s to 999yrs for no cost apart from legal fees.
However if they dont extend the lease’s in 72 years your flat would return to the freholder, meaning 8 people would then own your flat. Solicitors hate dealing with leasehold properties.
to answer your email imagine that the freehold is completely seperate to the lease hold. In 72 the lease will end and the flat will revert to the freeholder. Now you have a 1/8 share of the freehold so you would then own 1/8 share of your flat. But that is in 72 years. The likely hood is that everyones lease is getting low and will need to be extended soon.
Also a mortgage lender is not interested if a property has a share of the freehold they are only interested in the lenght of lease and if it is defective or not.
To make it quite obvious there is no such thing as a freehold flat every flat has a lease and is leasehold some may come with a share of freehold or indeed the entire freehold but there is no such thing as a freehold flat, people just like to say freehold because it sounds better.
I think you will find a lot of mortgage lenders do not like freehold flats. If its freehold why would it have a lease. They are asking a lot of money for what could be a milestone around you neck. I think you should also consider if you wish to selling it on in 10 years, it will have 62 years left - far to lower lease. Don’t buy it.
you are ok with that
Freehold is the way to go don’t touch Leasehold as it is only yours or your families as long as the lease does not run out ,when it does , you or they have to pay again????