Author: LV-Admin

According to official UK Government figures, there are over 4 million residential leasehold properties in the UK.

Almost all of them are eligible for the legal right to acquire their Freehold under Collective Enfranchisement rules. Many apartment owners are becoming aware of the various benefits of owning their freehold rather than a lease. So, why do so many Collective Enfranchisement initiatives fail to get off the ground or collapse when they do?

Our lease extension experts can guide you through with efficiency.

Here are the top five mistakes we notice the most and how to avoid them.

Mistake #1: Failing to recognize the advantages of owning a freehold.

• “We already have long leases in place.”
• “We have managerial authority.”
• “Our flats will be worthless if we control the freehold.”

In various respects, freehold ownership differs from leasehold ownership, and each transaction is unique. Apart from acquiring a 999 (perpetual) lease and eliminating ever-increasing ground rent expenses, being master of your destiny has other direct and indirect advantages. When you are not restricted by a freeholder, you may manage small and significant improvements on your timetable, improve the building as you see fit, and save money on everything from contractors to insurance. The time you save by not engaging with and occasionally arguing with a Freeholder will be better spent on your own life. Leaseholders who own a portion of the freehold benefit from increased resale and rental prices. In a nutshell, leaseholders who have grouped together get along nicely. It’s what many people refer to as a “no-brainer.”

Mistake #2: Overestimation of the obstacles

• “We will never be able to recruit the needed 50%.”
• “It will be too expensive and take too long.”

All collective enfranchisement demands, large and small, face comparable early hurdles, but erroneous assumptions are by far the most serious. Instead of presuming that the 50% qualifying tenant criteria will not be met, recognize that they will be appreciative of the chance and actively recruit leaseholders with the objective of achieving as near to 100% as feasible. Rather than presuming that the expense would be too high or that it will take too long, go through a process of calculating both before determining whether or not to proceed at each level. Take the proper moves at the appropriate moment, and you’ll avoid problems you weren’t even aware of.

Mistake #3: Underestimating the expense or the amount of organization necessary

• “It’s similar to extending my lease; there’s not much to do.”
• “Our lawyer will organize everything.”
• “We have a cost estimate from our counsel, and we will stick to our budget.”

Oversimplification of the procedure is another important reason why many collective enfranchisement requests stall or fail. There are some parallels between extending your lease and acquiring a portion of freehold. Both are legal rights with legislative procedures. The parallels, however, end there since Collective Enfranchisement has other elements to examine. You are only as powerful as the weakest connection when dealing with several signatories. You are acquiring a full facility, including land and airspace, as well as potential development sites. There are several costs you should be aware of right away (such as the Freeholder’s fair professional fees, SDLT, and company creation, maintenance, and accounting) that no one informs you about. Solicitors will oversee the legal procedure but not the project. Organizing your group correctly will result in great success; neglecting to manage the project from the start will raise expenses and hazards.

Mistake #4: Avoiding a Participation Agreement

• “A Participation Agreement is great to have, but we can save time and money without one.”

A Participation Agreement is a legal instrument that establishes the framework for leaseholders to collaborate in order to achieve specific aims. Good quality PAs need skilled writing and signature by each individual or firm who is a leaseholder for each apartment. As a result, it is true that omitting this step can save some money and time. However, if and when any of your participants disagree, the expense of addressing and resolving the issues will usually far surpass the cost of the Participation Agreement. Preparing for arguments is the greatest way to avoid them. A Participation Agreement is a very useful instrument.

Mistake #5: Using the cheapest solicitor or surveyor

• “Expensive solicitors and surveyors will just demand a high hourly rate.”

When it comes to training experts, obtaining the perfect match for your facility is critical. A freehold purchase is a substantial investment, and with higher benefits come more dangers. On a per-hour basis, hiring a highly specialized and skilled solicitor and surveyor may be more expensive. However, if their knowledge and skill prevent even small hiccups, they will have shown their worth many times over. Going a little cheaper might frequently turn out to be far too pricey in the long run. Find the best fit.

For further questions related to lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.

You recently got a letter in the mail from your landlord stating that he is serving a Section 5 Notice and plans to sell the freehold of your building, making you an offer. You know deep down that you should investigate your choices, but where do you begin, and what exactly is section 5?

Don’t worry: we’ve got the answers and next steps you need.

For more queries related to the length of the remaining lease and how much any lease extension may cost, have a lease extension valuation valuation undertaken by an expert lease extension valuer.

What is a section 5 notice?

A Section 5 Notice is issued to eligible tenants (also known as building or property leaseholders) informing them that the landlord intends to sell the property’s freehold.

The Landlord and Tenant Act of 1987 imposes a legal requirement known as the Right of First Refusal, which requires landlords to deliver the notice to leaseholders before selling the freehold interest on the market. Failure to comply is a criminal offense.

Section 5 notices (5a, 5b, 5c, 5d) are used in a variety of situations, including when the freeholder wants to sell the freehold at an auction. However, the procedure is similar for both.

Leaseholders presented with a section 5 notice must first determine how long they have to accept, but leaseholders should be allowed at least two months to make a decision. If they are satisfied with both the price and the terms of the acquisition, they must go via a formal procedure, beginning with serving an acceptance notice on the freeholder, which must be provided by a majority of the eligible tenants.

What does a right of first refusal mean for tenants?

The first step is to recognize that this is a once-in-a-lifetime opportunity.

The Freeholder is selling their estate either to an unknown buyer, such as a developer or at an auction.

According to UK law, as a leaseholder, you have the right of first refusal and can purchase your freehold if you so desire.

Challenges

It is not easy to exercise your right. You must do the following:

• Determine who will lead the process.
• Collaborate with at least 50% of the apartment owners in your building.
• Determine the financial viability of purchasing the freehold at the offered price.
• Determine the finance arrangement.
• Nominate or form a purchaser (typically a limited company) before accepting the offer in the proper legal form.

And you only have two months or fewer to complete all of this.

You must then collect the funds and complete the transaction.

Does that seem intimidating? Don’t give up!

Unlike a Collective Enfranchisement claim, you do not need to bargain over the price with this take-it-or-leave-it offer.

It is critical to be well-organized and cohesive.

Specific aspects of the procedure can be assisted by experts.

• Engage a trained surveyor to evaluate the freehold’s market worth. If the offer price is less than market value, you can focus your efforts on convincing leaseholders to accept it.
• There are numerous excellent solicitors available to handle the necessary legal and conveyancing procedures. Look for someone with suitable experience.

Alternatively, you can hire an expert to mentor you and manage the entire process from start to finish, generally at a reduced cost.

Profit from the advantages that come with owning a freehold, such as:. Modernize your leases, optimize building management, and prioritize those works, repairs, and improvements. All of this will add genuine value to your flats and free up your time to focus on what matters most – your life.

Leasehold Valuation specializes in leasehold valuations, lease extensions, enfranchisement. Have a quick 10-minute free consultation with one of our RICS experts.

A flat or apartment leaseholder can also own a share of the freehold of their entire building, in addition to a lease on their individual flat. This is referred to as a share of freehold.

Because buying the freehold of a flat is not possible on an individual basis, flat or apartment leaseholders instead have the option to own a share of the building’s freehold by joining the collective group that wants to take over the freehold of the property. This process is known as collective enfranchisement. A collective enfranchisement occurs when a group of leaseholders band together to take control of the freehold of their building.

If you are looking for a lease extension in the UK, contact us for assistance. Our team of chartered surveyors can help you successfully negotiate your lease extensions or enfranchisement. Give us a call for a consultation today

A new leaseholder who buys a unit with a share of freehold becomes a shareholder in
the company that owns the freehold of the building. They control the freehold and the
management of the building. The apartments and flats in the building are still leaseholds, but as
members of the freehold company, they have a vote in how the building is
managed, can instruct contractors, can prioritize work, and manage
their service charges. Their leases are typically extended for
999 years.

What are the Responsibilities of a Freehold Shareholder?

The collective freehold shareholders, or freehold owners, are responsible for the
building and its land’s maintenance. This involves obligations such as ensuring that lifts, stairways, and halls comply with health and safety laws, instructing on repairs, and staying up to date on ever-changing property legislation. They have control over the money, what work is done, and how it is prioritized. Many buildings (or collectives) hire a managing agent to handle this for them.

What is a Managing Agent?

A managing agent's tasks include tendering contracts for work to be done, collecting service charges, coordinating payments for any work done on the building, and developing budgets for anticipated building work.

What are the Benefits of Buying a Freehold?

You may be considering forming a collective with the other leaseholders in your block. Though it may appear to be a daunting process, it is not, and there are numerous advantages to purchasing your freehold outright, including:

● Increasing the value of your home
● Complete control over the building’s maintenance.
● Taking complete control of the management
● The ability to obtain more extensive or affordable insurance policies
● Though a freehold purchase will provide some or all of these benefits, owning a part of a freehold has some drawbacks.

Key Problems with Buying a Share of Freehold

1) Shared Management – Purchasing a freehold share is not the same as purchasing a freehold dwelling. When you buy a freehold residence, you have ultimate authority over everything that happens to your property. You get to make all decisions about what gets done and what doesn't. When you just own a portion of a freehold, decisions are taken jointly with the other freehold owners.

This means that your co-owners (shareholders) may be able to make decisions that impact your property. However, if you did not own a share of the freehold, you would be in a worse position because you would have little/no say in these decisions.

This small issues with owning a freehold share, but they are not insurmountable. Whilst all freehold shareholders may not agree on everything, at least they all have a say. Because of the complexities of this and other issues, we recommend seeking professional advice before purchasing a freehold.

2) Lack of Expertise – It is critical that all freeholders have a good awareness of Landlord and Tenant rules, or have selected a representative who does, to guarantee the building maintenance and upkeep responsibilities, as well as health and safety legislation, are met. A lack of knowledge in these areas may result in building deterioration, as well as disgruntled or vulnerable individuals living in potentially hazardous surroundings. Failure to comply with legislation may also result in criminal prosecution, as well as penalties or even jail, which is why we always recommend that you obtain professional advice before purchasing a share of the freehold.

3) Cost of purchasing the freehold – It can sometimes be very expensive to purchase the freehold. This is because the freehold will include any flats which are owned by the current freeholder, porter flats (or other staff flats), storage cupboards, land, car park etc. Therefore, the cost can quite easily become prohibitive.

Buying the freehold of your property could be very beneficial. However, the process involved in purchasing your freehold is complex and confusing. Leasehold Valuations will guide you and advise you of your best options Feel free to call us at 01753 542984 for a free 10-minute consultation.

Introduction

As a landlord, it’s essential to understand the distinction between tenancy agreements and short-term rental agreements, as they serve different purposes and offer unique benefits. In this article, we’ll explore the definitions, pros, and cons of each type of contract to help you make informed decisions when renting out your property.

What is a Tenancy Agreement?

A tenancy agreement is a legally binding contract between a landlord and a tenant, granting the tenant the right to occupy a rental property for a predetermined period, usually six or twelve months. This agreement provides stability and security for both parties, outlining their responsibilities, such as rent, pet policies, and lease duration. Once signed, the terms of a tenancy agreement cannot be changed without the written consent of both parties.

Pros of a Tenancy Agreement:

Stability and Consistency:

A fixed-term lease provides stability for both the landlord and the tenant, ensuring a predictable rental income for the landlord and a secure living arrangement for the tenant.

Legal Protection:

A well-drafted tenancy agreement clearly defines the rights and responsibilities of both parties, reducing the likelihood of disputes and misunderstandings.

Cons of a Tenancy Agreement:

Missed Revenue Opportunities:

In rapidly developing areas with rising property prices, fixed rent might lead to missed income from potential market increases.

Tips for Landlords:

Offer lease renewals: To maintain a long-term relationship with reliable tenants, consider offering lease renewals with updated terms and conditions. for Lease renewal visit reliable rics chartered leasehold Surveyors expert in real estate legal terms.

What is a Short-Term Rental Agreement?

Offer lease renewals: To maintain a long-term relationship with reliable tenants, consider offering lease renewals with updated terms and conditions. for Lease renewal visit reliable rics chartered leasehold Surveyors expert in real estate legal terms.

Pros of a Short-Term Rental Agreement:

Flexibility:

Short-term agreements are suitable for tenants who require temporary housing, such as travelers, students, or those in transitional periods.

Rent Adjustments:

Landlords have the flexibility to adjust rent according to market conditions.

Cons of a Short-Term Rental Agreement:

Tenant Turnover:

Frequent tenant turnover may lead to additional expenses for advertising, screening, and cleaning.

Uncertainty:

Some tenants might be hesitant about indefinite rental terms and frequent rent increases.

Conclusion on Tenancy Agreements:

Tenancy agreements are suitable for landlords seeking stability and steady income. However, they might miss out on potential revenue in areas with rapidly rising property values.

Conclusion on Short-Term Rental Agreements:

Short-term rental agreements offer flexibility and rent adjustment opportunities. They are particularly beneficial in areas with high tenant turnover.

Quick Tip

Calculate Initial Leasehold Extention Cost with Our FREE Online LEASEHOLD EXTENSION CALCULATOR

Final Conclusion:

Before offering any rental agreement, it’s crucial to understand your tenant’s needs and preferences. Whether you choose a tenancy agreement or a short-term rental agreement, prioritize clear communication and a well-drafted contract to protect both parties’ interests.
For professional assistance in evaluating your property’s value and finding the right rental agreement, consider consulting an experienced real estate valuer. They can conduct a physical inspection of the property, analyze the local area, and provide valuable insights to ensure a successful rental experience.

Many questions may arise while purchasing a leasehold property. The questions that occur most frequently relate to the length of the lease and the service charges applied to buyers wanting to purchase leasehold property.

Our experienced chartered surveyor gives his advice on the six top leasehold issues.

What is Leasehold Ownership?

Leasehold ownership is the right to hold a residential property for a specified period. Leasehold ownership is based on lease terms but also has associated property rights. It has similar rights as a freeholder has but only for the specified length of the lease.

Residential Lease – Why is it Important

The residential lease is an agreement between the leaseholder and the landlord to establish the rights of both parties. The lease agreement defines the rules or obligations as to the use of the property, also how the landlord and leaseholder should deal with each other and any other leaseholders. In addition, it defines the landlord’s obligations relating to such issues as repairs, service charges, maintenance, and management of the property. Any leasehold agreement is crucial, and the leaseholder must understand the obligations, of both parties, that it contains.

The lease wording is usually in legal or technical vocabulary and will vary from property to property. Leaseholders who find it difficult to comprehend their lease should obtain advice from a surveyor and insist they deliver a report on its terms when required to negotiate with the buyer.

Any potential buyer must establish responsibility for key issues, including the landlord’s obligations for managing and maintaining the structure, exterior, and common areas of the property, what the leaseholder’s duties will be with regards to rent and service costs, and whether there are any unusual or onerous covenants relating to the leaseholder’s use of the property.

Things to know before Buying a Leasehold Flat

Leasehold flats may be in purpose-built blocks, converted houses, or attached to retail or commercial premises. Usually, the structural part of the building and the land will stay in the landlord’s ownership. The lease agreement will cover all the spaces and facilities within the four walls of the flat, including walls, floors, and ceiling, but will not normally include any external areas. The landlord is generally responsible for the maintenance and repair of the building. Additionally, it is the landlord’s responsibility to maintain common areas and the flat’s structure and services.

The property owner can be an individual, a local authority, or a company. It is also possible that the landlord is a resident management company. In some cases, leaseholders of a block of flats can apply to extend the term of their lease or can buy the freehold from the landlord.

Remaining Lease Length

The term remaining on the leasehold is crucial. Firstly, if the lease term drops below 80 years, the cost to extend the lease increases as an additional marriage value is added. “Marriage value” is the increase in the value of the property with a long lease as opposed to a short lease. Hence the value of the property will increase on the completion of the lease extension, meaning the cost of the lease extension increases once the lease length drops below the 80-year threshold.

For more queries related to the length of the remaining lease and how much any lease extension may cost, have a lease extension valuation undertaken by an expert lease extension valuer.

Another issue to consider is that the property’s value drops each year once or reaches less than 80 years. Therefore, you must apply for a lease extension or buy the freehold in order to maximize the value of your property.

What does the service charge cover?

Generally, a service charge is a charge for the leaseholder to cover the costs of any services that landlords provide, such as cleaning the common parts, repairing the roof, gardening, etc. For some leases, the service charge would be a fixed sum that will be payable on a regular basis. Leaseholders can ask for a breakdown of the service charges and also have the right to apply to the First-tier Tribunal for any unreasonable charges in England. During the process of buying a leasehold flat, the buyer should check the details for any existing and future service charges and should also check for any forthcoming work which might affect the service charge after the purchase.

Buying a Leasehold Flat, Is Worth It?

Historically, in the UK, flats have been sold on a leasehold basis. Some leasehold flats are now sold with a share of the freehold. Buying a leasehold flat should only be done once you are familiar with the legal rights and duties related to buying a leasehold property. You should consult a chartered surveyor and get appropriate professional advice regarding any property before you consider buying.

So, you’ve finally found a place you’re comfortable with. The neighborhood is good, no leaking pipes and no creepy noise are coming from the walls at night, and just when you thought it couldn’t get any better than this, it’s already that time of the year when the landlord wants to raise the rent, potentially threatening your idea of settling down for a bit. Now that will make you think about how to negotiate the next rent rise so you can still retain your property while spending less on rent each month.

But don’t worry. Not everything has to be sad and gloomy as long as you can still try negotiating your terms with the landlord. It’s possible to reach a mutual agreement and negotiate a win-win situation for both parties, so nobody is left unsatisfied. In reality, it works like any other negotiation – you just have to find a way that makes both you and your landlord happy.

Once you begin to consider what both parties have to win or lose, it becomes a much simpler process. Of course, you want to pay less but to avoid moving out and looking for another property. At the same time, the landlord wants more money but to avoid looking for a new tenant. With that in mind, you can present an offer that suits both of you and settle on a reasonable rent amount.

If you don’t know how much to offer for a property like yours, there are two ways you can find that out, which we will discuss further. Try these methods that can help you with your negotiation. 

When do you negotiate?

There are two ways you can approach this.

• You could speak to a local estate agent and see what similar properties in the area are letting for and also find out what their fees will be for finding a new tenant for the landlord. Divide the agent’s fees by 12 and then ask the landlord if they would reduce the current market rent by this divided amount as he will not have to pay the agent’s fees if he retains you as a tenant.
• You could look on websites like Rightmove and Zoopla and see what similar properties are letting for and offer this amount to the landlord.

At this point, they would either agree to your terms or present you with their own offer, which you can compare with your valuation of the property.

RICS Valuation

Open up a dialogue as soon as you can

It is a good idea to establish direct contact with the landlord and work out a deal that works for both of you. Start discussing your terms early on because the earlier you begin a conversation, the more time you have to convince the landlord in your favor. Get in touch with them directly and try something like, “I would love to continue staying in the apartment, but the increase in the rent is a bit outside of my budget at the moment. Can we discuss this and find something that makes us both happy?” This can open up your opportunity to discuss your terms with the landlord.

Establishing contact with the landlord before you start to look for another property will open up a discussion and will give the landlord an idea of the kind of rent that you have in mind. Depending on their response, you can judge whether they are willing to bend or not. This can help you further down the line when finalizing the deal.

So, consider your budget, what exactly you can afford, and how far you’re willing to go to turn the deal in your favor.

The surveyor will undertake a physical inspection of the house. Before the physical inspection’s they investigate the location and analyze the local area to see if anything night influences the value. After this, they may check any documents regarding the lease extensions or any shared ownership details if necessary. They may also make inquiries with local selling agents before they arrive at their valuation.

RICS (Royal Institute of Chartered Surveyors) is a global professional organization for property professionals. It sets and monitors standards that members should adopt in their professional work to ensure consistency and a global brand that is recognized around the world.   

The RICS is connected to other national surveying institutions, collaborates with other professional bodies, and, in 2013, was a founder member of a coalition to develop international property measurement standards. It also delivers cost information and professional advice on valuation and other stuff.

What is a home buyers survey?

Home Buyer Survey is a visual inspection of a residential property that is done by a surveyor that inspects the observable spaces in your property or home. The Surveyor generates a report on the property’s condition and highlights the issues and defects.

How do surveyors value a property?

Instructing a Surveyor to value your property is an integral step in buying a property. When a surveyor starts evaluating the property, they look at comparable properties and the condition of your property when ascertaining the value.

The surveyor will undertake a physical inspection of the house. Before the physical inspection’s they investigate the location and analyze the local area to see if anything might influences the value. After this, they may check any documents regarding the lease extensions or any shared ownership details if necessary. They may also make inquiries with local selling agents before they arrive at their valuation.

How long does a house survey take?

The house survey takes time depending on the level of the survey that you have chosen and depends on the dimensions of the house. For instance, if you are choosing a basic survey, it may take an hour to get completed. The medium-level survey would take 3 hours. And a complete structural survey depends on the proportions of the property that vary and might even take a whole day.

When will I get my house survey report?

The house survey report may take time as it depends on the particular survey and on report complexness. The chartered surveyor will let you know how much time it will take to get the report, but it will probably take 5 to 10 days.

The cost of home buyers survey

A home survey can save you time and money; how much does the home buyers survey cost? The charges vary between surveyors but will partly depend on the size of the property. The larger the home, the longer the surveyor will need to spend analyzing and evaluating it. Leasehold Valuations has experienced chartered RICS surveyors who can efficiently value your property. 

Having a survey done is usually worth doing as it will make you conscious of any problems with the property. Although initially, it is a capital outlay it could help you avoid any surprising cost in the future. It can also be used to negotiate the price of the property down if it highlights any issues.

New-build snagging survey

Are you buying a newly constructed home? In this case, you do not need a home survey. You will need a snagging survey. What does a snagging survey mean? It includes inspecting various elements of the build such as standard finishes such as plaster, tiling, or windows, and more. By having a snagging report, you can share that with the builder so that any issues in the property can be resolved whilst the builder is still on site.

Leasehold Valuation specializes in leasehold valuations, lease extensions, enfranchisement. Have a quick 10-minute free consultation with one of our RICS experts.