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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25433
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Greetings... I'm looking little help. I'm one of

Customer Question

Greetings... I'm looking for a little help.
I'm one of five residential leaseholders. There is also a single commercial leaseholder in the building. We (the residential leaseholders) formed a RTM company early 2014 when the former management company (the builder who built the establishment in 2000) went into administration. We use a management company to oversee the affairs of the building. The administrators originally offered the Freehold to us for £5,000 to which we politely said no. Now we're being offered the same for £500. We all have 999 year leases and so the value of the Freehold is very low (we each pay 5p per year peppercorn ground rent). Our management company are advising us to purchase the Freehold. They are referring us to their solicitor to help who will charge us between £500 and £1,000 for the work (VAT on top). We are aware that there is liability for the legal costs of the administrator to consider, and so are very nervous about proceeding with the purchase. Myself and one other are keen to sell our flat leases and are concerned that the ambiguous status of the Freehold is going to be a problem.
My query is, what are the consequences of not taking the offer of purchase? How might that effect us down the line? Will it effect in anyway the saleability of our leases?
We certainly don't want to start on a legal process that might cost good money without knowing the benefits and pitfalls.
Best wishes and regards, *****
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience. May I clarify that the premium proposed is £500 for the freehold in total please as opposed to each?Similarly is the charge proposed by the solicitor £500-1000 + VAT each or for all of you?How many leaseholders are there in the building?
Customer: replied 2 years ago.

£500 is the total cost, as are the £500-£1,000 solicitor fees. There are 5 residential leaseholders and 1 comercial (a sandwich shop). So the £1,500 (maximum) should all participants take part would be split 6 ways.

One leaseholder is refusing to take part, and will not give up her rights under Section 5 of The Landlord & Tenant Act. I'm unsure if that's an issue or not, or whether the others can simply cover that cost so long as the majority are in agreement.

Expert:  Joshua replied 2 years ago.
Thank you. Both these figures seem very reasonable in my view and would be something that would be well worth considering as it is likely to improve the marketability of your flats if not also potentially add to the value but based on what you say, I would agree that any increase in value would be limited given what you already have.However, in addition to the above, acquiring the freehold does make sense because from a transactional point of view, when you come to sell the property you will be required to obtain some limited information from the landlord such as rent receipts and also serve notice on the landlord in respect of any change of ownership. At the moment, the administrators of the company should perform this role albeit with limited ability but ultimately cannot sell the freehold to you all somebody else, then it will pass to the Crown bona vacantia and will be nobody to perform these roles which means that you would need to either purchase the freehold from the Crown or purchase indemnity insurance which would likely cost between 100 and £200 to cover absent landlord. it is unlikely you would be able to sell the property without pain perception insurance policy which is a one-time fee because it would not be in accordance with mortgage lenders standard instructions.if you do not purchase the freehold, providing you are prepared to cover the cost of an indemnity insurance policy in this respect, from a legal perspective it should be perfectly possible to sell your flat regardless but it is possible that it may put off the old nervous buyer if the freehold is left as it is.I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me.
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Customer: replied 2 years ago.

Hi Joshua,

Would you mind clarifying "it is unlikely you would be able to sell the property without pain perception insurance policy which is a one-time fee because it would not be in accordance with mortgage lenders standard instructions" please.

Also, if one of the six refuse to give up Section 5, does that mean the deal is dead in the water?

Regards,

Steven.

Expert:  Joshua replied 2 years ago.
Certainly. Sorry this is a voice recognition software breakdown which I did not spot. It should read "it is unlikely you would be able to sell the property without paying for an indemnity insurance policy…"