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Buying the Freehold

Your experience/knowledge

Hello

I am looking at the option of buying the freehold of my current 999 years office leasehold. 

In addition to my office, the freehold is made up of two flats one of which has 60 years lease left. 

My reason for buying is it may be a good investment and I do not have to seek permission for doing any works. 

I would be grateful if you could share your experience of buying a Freehold as a leaseholder.  How do I assess whether this would be a good investment? 

What should I be doing as part of my due diligence? 

I know Freehold can be valued by RICS surveyor. 

Thanks

 

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18th Feb 2019 15:59

FirstTab wrote:

How do I assess whether this would be a good investment?  

NPV of future expected cashflows at your weighted average cost of capital.

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18th Feb 2019 16:08

FirstTab wrote:

Hello

What should I be doing as part of my due diligence? 

Review the leases for the flats above - you may not have carte blanche for "doing any works" even as the freeholder.

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18th Feb 2019 16:08

One point
Anyone buying a flat would want a lease of greater than 60 years. An extension of a lease would be granted but at a cost. By owning the freehold you avoid this cost

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18th Feb 2019 16:51

The sellers see these deals as a ransom type arrangement and will look to stick you on the price.

If you cannot agree there is some form of arbitration available to get agreement.

If the owners of the flats have less than 60 years left on their lease they will run into trouble with mortgage companies so if you did buy it you could get some money back of them for granting new 100 year leases.

The seller will know that and likely factor it in to his asking price.

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28th Feb 2019 21:03

If you have not had experience of owning the freehold of a building with residential flats in it, you need to do your research first as to the consequent legal obligations. My sister-in-law is a leaseholder in a block of flats in London and she also works for the freeholder. I have heard many lurid tales of the difficulty in keeping up to date and complying with the ever changing regulations as to what has to be done, by when and the format of how it is done.

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