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Alex J.
Alex J., Solicitor
Category: Property Law
Satisfied Customers: 3614
Experience:  Two years conveyancing experience.
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I own a studio flat in an old listed building converted in

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I own a studio flat in an old listed building converted in to 35 flats. The residents have their own Management Company Ltd. represented by a board of directors make all of the decisions concerning the maintenance of the property.
I would like to sell my flat, ideally within the next 12 months and was just about to put it on the market when I received notice that the freeholder intends to dispose of the freehold at auction this coming May.
Following this, I received a letter from the Management Company advising that they are looking to ascertain the level of interest amongst all 35 leaseholders with regards ***** ***** Management Company proceeding to purchase the freehold on behalf of possible participating shareholders. At this stage they are just looking to establish if the requisite number of shareholders, namely 17, would be interested in proceeding to obtain a valuation and estimate of costs.
In view of this, I am now wondering whether or not I should delay putting my flat on the market, which I don't really want to do. This is because I am wondering whether it would be worth my while purchasing a share of the freehold, if I can afford to do so, for the sole purpose of adding value to my property so that I could then sell it for a higher price.
I currently have 93 years left on my lease, so if I were to buy a share of the freehold before putting my flat up for sale, is it likely that I might then be able to sell my property for a significantly higher price? ( I think I would only really want to consider buying the freehold if it were likely to add at least say an extra 10% to the value of my property when I come to sell it )
Thank you.
Submitted: 2 years ago.
Category: Property Law
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
This site does not have valuers so unfortunately we cannot tell you an exact figure increase what I can tell you is the following:
1. When you buy or sell flat you often buy and sell the lease;
2. To mortgage a lease you need to have an unexpired lease equal to approximately the length of the mortgage plus 25 years;
3. Therefore as a general rule of thumb a bank will only mortgage a leasehold property that has a lease longer than 50 years left approx;
4. Your mortgage is 98 years - you have most of the value in the property. When your mortgage gets less than about 70 years you may have problems selling it and at this point would need to agree a lease renewal with the freeholder (which the freeholder has to give you by law) but this comes at a premium which if you cannot agree it then is set by the Leasehold Valuation Tribunal;
5. If you become your own freeholder by agreeing to purchase the freehold you can then agree to give yourself a new lease at no premium (you will have already basically paid the premium when purchasing the freehold);
6. If the shareholders go ahead and purchase the freehold without you, they will probably have to set up a new company and anyone that does not participate if they want subsequently to then renew their lease will have to approach those flat owners that did participate and either buy into the freehold or pay a premium;
7. This leaves the question is your flat worth more if you participate - technically yes, but anyone would probably have to wait 20 years to see the benefit of this, plus they would need reassurance from the other participators that they would get a lease extension for free. The fact that you have a 98 year lease left means that your lease is still valuable I would be surprised if anyone would value the share of freehold that highly - personally I would just offer a prospective purchaser an assignment of your right to participate in the freehold purchase and let this purchaser deal with the time, cost and expense associated.
That said as I have explained above we are not valuers, so I would consult the opinion of an estate to ask if a share of freehold will increase the value.
Kind regards
AJ
Alex J., Solicitor
Category: Property Law
Satisfied Customers: 3614
Experience: Two years conveyancing experience.
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