Huddersfield is renowned among the town’s residential conveyancers for its number of properties held on long-term leases.
Every so often I take calls from a leasehold property owner enquiring ‘Should I buy my freehold?’.
I would generally respond with a few questions of my own:-
How long is your Lease?
Where the property is held under a 999 year lease with perhaps less than 100 years expired, the purchase of the freehold reversion is unlikely to add market value to the property.
However, there are some properties around the town on 125 year leases with perhaps 50+ years gone from the term. Where the lease term currently stands at 75 or less it would certainly be advisable to consider purchasing the freehold reversion and in these circumstances the purchase of the freehold reversion will add value to the property and prevent issues on a future sale where, perhaps, the lease term left to run does not meet a purchaser’s mortgage lender’s criteria. It should be noted that as the remaining years left to run under a lease reduces, specifically on these shorter term leases, the more you will likely need to spend to purchase the freehold.
How much is your annual rent?
Often, long leases provide for payment of an annual ground rent which are generally nominal. The ground rent is set by the lease and cannot be increased. Will purchasing the freehold ever pay for itself if you are merely looking to get rid of the requirement to pay rent?
Are you planning on extending or altering your property?
Most residential leases do contain provisions preventing extensions or alterations of the property without obtaining the landlord’s consent – aside from any requirement for planning consent and/or building regulation approval. Most landlords do not generally have problems with the usual householders plans for extensions, etc, (provided any required statutory consents are obtained) but they do take this opportunity to charge tenants for providing formal written consent. Depending on what works are planned, sometimes the monies spent obtaining consent could have purchased the freehold reversion or gone a long way to doing so. Ordinarily the purchase of the freehold reversion would ‘get rid’ of the tenant’s covenants to the landlord meaning that once the freehold has been purchased there would be no need to obtain landlord’s consent for future works.
Remember, if your landlord has offered you the freehold reversion for sale, it is generally expected that you would discharge the landlord’s legal costs (as well as your own) in the transaction which could increase the overall expenditure by double, or more.
Of course, whether there is any financial gain to be made from purchasing the freehold there are those that really do like to be ‘master of their own castle’.
If you have been offered your freehold reversion for sale and would like to discuss proceeding with the purchase, please contact Liz Wallis or Alison Mason who can discuss the transaction with you. Conveyancing costs for this type of transaction start from £300 plus VAT plus disbursements.
Liz Wallis has more than 20 years’ experience of working in residential property and qualified nearly 10 years ago as a Licensed Conveyancer. Liz can be contacted on 01484 538421 or via e-mail.