Tag Archives: Landlords Retained Rights

FREEHOLD PURCHASE – DON’T FORGET THE BIT ON THE SIDE!

Do you approach the cost of your freehold purchase on the basis of a collective amount based on the number of flats in the building? While this may give a fairly accurate figure where there is little additional land such as flats in a converted terrace house, this is not always the case where the building sits in its own grounds.

The freeholder will often seek an additional amount for this area which could be quite substantial. How can this be and what are the circumstances of such a claim?

The 1993 Leasehold Reform Act gives qualifying flat owners the right to purchase the freehold of the building in which the flats are situated. They are likewise entitled to purchase say a garage or a parking space included in their lease and where they have exclusive use, sometimes this ownership is by way of a separate long lease or leases. Finally they are entitled to purchase the garden and grounds over which there are communal or shared rights in the flat leases. The problem lies with this third category where it can be shown there is additional value which the enfranchising group benefit from having bought the freehold and which may not be apparent before the purchase.

Lets take some examples. The obvious one is where the garden and grounds over which there are shared amenity rights is somewhat larger than may be simply for the enjoyment of the flat owners. It may already have planning permission for additional similar residential development, or it have have hope value for this at some time in the future. In either case this will show a value higher than as amenity land. It will be part of your valuation surveyor’s duty to flag this possibility for you although a clue can often be seen in the ‘landlords retained rights’ section of the leases.

In fact the wording of leases is often helpful in indicating where there might be an additional bit on the side! We have recently provided advice to a freeholder client faced with a formal notice of enfranchisement from two flat owners in a converted house. The effect of wording such as ‘rights of access on foot only’ will disappear with the purchase of the freehold and in an area with limited on street parking the grant of vehicular rights with the freehold transfer is of additional value.

Another example where we acted for the flat owners concerns an amenity area and noted as such in the lease but which over the years had become used by flat owners to park their cars. The lease did not prohibit parking but the tribunal nevertheless valued this as such.

The moral is to avoid the DIY valuation, and get proper and experienced advice from a professional valuer.