I am looking to buy a Property with a Share of Freehold but it is the only one in the Block with a Short Lease. How should I Proceed?

by The Chartered Surveyor

Question

I am looking at the possibility of purchasing a flat with savings and additional borrowing on the equity of my current property.  I am therefore not looking for a mortgage on a prospective flat purchase so a shorter lease will not be worrying any mortgage provider – just me!  I have been advised by an estate agent selling one particular flat that extending the lease will not be a problem as ‘the residents own the freehold’ which would involve only a payment of £1 for the lease extension plus additional solicitors costs of approximately £1000.
 
If this were to be the case then that is no problem but I do not want to be naive in my dealings with the agent as they might be desperate to offload a difficult sale.  Do different rules apply if the residents own the freehold of a block of flats?  If extending a lease does not cause me huge problems, be they financial or stress, then this may be a way of picking up a potential good buy.

Answer

In theory if the property is sold with a share of freehold you should be able to extend your lease at a nominal rate i.e. £1, if the other freeholders are happy for you to do so. If your property is the only one with a short lease (and the others extended when they bought the freehold) they could request that you pay a premium to extend. To complicate this further the current owner would have to do this as you would have to have owned the property for 2 years to extend under the Leasehold Reform Act 1993.

My advice to you is to request that the current owner extends the lease before you exchange contracts. He may if the other freeholders are reasonable do this for £1 plus solicitors costs. The last scenario you would want to find yourself in is one where the freeholders, whilst slightly greedy, use their full rights under the Act and demand a full valuation to determine the premium for you extending.