Ground rent school boy error?

i did not think it was possible to buy the freehold for an individual flat in a block?
The previous owner had 67 years remaining on the lease and paid £14,500 to extend to 99 before i bought. However, this came with the doubling of ground rent or RPI every 10 years - (this is what i want to re-negotiate out of - to peppercorn - not just extend the lease) increase the lease to 999 or a longer term...no idea if thats possible? This is the ideal outcome.

Reply to the comment left by Freda Blogs at 30/03/2018 - 12:15
Thank you, appreciated.

Reply to the comment left by Marcus at 30/03/2018 - 13:20
Hi Marcus

1. It is not possible to buy the freehold for an individual flat in a block. That would need to be done by a collective enfranchisement by some or all of the qualifying leaseholders within a block.

2. The terms of the previous owner's transaction suggest that he did not take professional advice, as he achieved a lease extension of only 32 additional years with an unfavourable ground rent pattern.

3. Under the statutory provisions, you are automatically entitled to a lease extension of 90 years at a nil ground rent (although the parties can agree alternative terms between themselves if they wish). It may be possible to achieve this even through an informal negotiation if the freeholder is willing.

However you will not be able to achieve a 999 year lease. This is logical really as it is unlikely that the building will last this long, and over time as the properties revert to the freeholder following expiry of the various leases, the freeholder may likely wish to redevelop.

Reply to the comment left by Freda Blogs at 30/03/2018 - 14:05
Thank you so much, very helpful. I have researched and identified the freeholder; should i begin the "informal negotiation" by simply calling them and asking if they are happy to discuss my lease requirements?

Reply to the comment left by Marcus at 30/03/2018 - 14:14
You could do that, although I would suggest you assemble your 'home team' first - your surveyor and solicitor - and the surveyor can make the approach to the freeholder - which will show him/her that you are serious and that the extension process will be appropriately managed.

Reply to the comment left by Freda Blogs at 30/03/2018 - 14:19
Right, will do.
Thank you Freda.

It will be very expensive to escape from this lease. Taylor Wimpey leaseholders with ground rents doubling from £250 to £8000 after 50 years and then stopping have been quoted around £35,000 for the lease premium. Your premium will be cost even more than this because after 50 years it will be £8,000, after 60 years £16,000, after 70 years £32,000, after 80 years £64,000 and finally £128,000 after 90 years.
The previous purchasers paid for too much for an inferior lease extension and their only hope was that some sucker might come along and buy their property. No offence is intended but you have bought a property which will be difficult to re-sell. Many residential lenders will not lend on properties with these kind of leases especially 10 year doublers. BTL lenders may be more amenable but you might have to rely on cash buyers. There will be a point in the future that the high ground rent at 7.2% compound increases may make even renting out to be uneconomic. You have two options really. 1. Try and sell it and hope no-one notices the onerous lease terms. 2. Apply for a Statutory Lease extension. Don't mess about trying to negotiate with the freeholder first but just apply as soon as possible to the First Tier Property Tribunal. Costs £100 for a paper decision or £200 more if you want a hearing. You will then find that your freeholder becomes much more amenable. The last thing you freeholder will want even at any price is to give you a 90 year extension at peppercorn rent. The freeholder's financial interest in this property will then cease and will never produce any income for him ever again. You will find if you are patient that should still be able to negotiate a 90 year extension but will have to pay a reasonably hefty premium, not for a peppercorn rent but to remove the doubling bit and just end up having a lease with 10 year RPI increases which should not cause any major problems on a resale.

Its always best to check on how amenable the freeholder is before throwing in the towel. As a block manager there are some non hostile freeholders out there. Much is true of the larger freeholders who are aggresive, have their hands in the back pockets of politicians and Lords.

Reply to the comment left by Freda Blogs at 30/03/2018 - 14:05
Many leases are 999 years and although the poster will not be able to extend to that under the statute, he could theoretically do so by agreement. Silver surfer is correct, the rising ground rent will be taken into account and it will be very expensive.

Marcus

Going to First Tier Tribunal as suggested here is not as simple and inexpensive as suggested, and should be regarded as an option of last resort, as there may be substantial legal and surveyors fees to pay to get to Tribunal and it is seldom worth taking that step unless there is a massive differential between the two parties' negotiating positions and/or there is a very specific valuation or legal point that a party wanted to pursue.

Secondly, do not be alarmed by the figures quoted here in these recent posts. Part of the valuation methodology discounts future ground rents such that in real terms they will be less onerous than at first appears. Further, as your lease is above the 80 year marriage value horizon, that is helpful in terms of reducing the premium that you would otherwise have to pay if you were sub 80 years.

Per my previous suggestion, I recommend that you see whether the freeholder will negotiate informally in the first instance. If there is reluctance or refusal, step 2 will be serving the statutory notice which will formalise the proceedings in terms of valuation date, timescales and route to Tribunal, and the freeholder must observe them.

With the right advice, you will be able to resolve this matter. It may take some time and some money but you will get there. Good luck.