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reminder system
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May 2004
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Liz Hodgkinson talks about acquiring the freehold on a block of flats
Hidden costs of
buying and selling
 If you are a leaseholder
in blocks of flats, you may have been urged to club together with other
leaseholders to buy the freehold.
It makes sense to be
liberated from landlords who may view the block as a way of making money
through outrageous service charges. But you also need to weigh up the costs
with great care – legal and other charges could add up to far more than
buying the actual freehold. Or for that matter, selling it on in the future.
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Jenny and Phil acquired
the freehold of a small block of eight flats some years ago. Previously,
they had owned a two-bed flat within the block. They bought the freehold at
auction from the previous freeholder, along with three other lessees, then
the other lessees sold to them and they found themselves sole freeholders.
All went well until
last year, when they sold their own flat and decided they couldn’t be
bothered with the freehold any more.
They weren’t interested in
making money out of the sale, and and offered the freehold to the residents
for £3,500 in total.
The eight residents,
most of them long-term leaseholders, eagerly accepted the bargain. But then
they were presented with a legal bill of £5,401.33 – nearly twice as much as
the price agreed. On top of that, they still had to find the money for
service charges, insurance, etc. This came to another £5000.
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Liz Hodgkinson is a prolific author
and journalist contributing to many publications. She has written over 40 books on a wide
variety of topics and has a background in national newspapers. She now falls into the
'later-life' age category and in recent years has started writing for this 'older' market,
and contributes to Saga magazine, among others.
Liz has two sons and four grandchildren. She is divorced and now
lives in London and on the SouthCoast. She has written three books on property matters and
her interests include snooping round other people's houses and viewing showhomes.
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How did this mount up?
Each of the eight residents was sent the total paperwork, making eight reams
of paperwork altogether.
The residents were
charged for local authority search fees, for water searches and
environmental searches – despite the fact these had already been carried out
on purchase of their own individual flats.
Each resident was given a
copy of the lease, which they already had, and also charged for hand
deliveries when the transaction took more than three months to complete.
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All these costs have meant
that there is a sinking fund remaining of nil, so that if the roof or
anything serious goes, there is simply no money in the kitty to pay for it.
Every time the
residents’ solicitor raised a question and the vendors had to reply, there
was another £175 an hour, plus VAT, to pay. This added greatly to the legal
bill, so that Jenny and Phil ended up with very little money from the
sale of the freehold.
Solicitor Roger
Taylor of Hedleys, says:
We handle around eight
freehold purchases a week, and there should not be high fees involved.
There is virtually no work that needs to be carried out.
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Each resident already owns a lease, so you would not expect to
pay for local searches.
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All buyers need to know is that the landlord actually owns
the title, and can transfer it to the lessees.
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The legal work should be restricted to the title, and for each
resident to receive a ream of paperwork is very strange.
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The legal costs of buying a freehold should come to no more
than a few hundred, rather than many thousands of pounds, as all you’re
buying is the right to manage your own property.
The solicitor
handling the residents’ affairs disagrees.
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Purchase
of a freehold reversion carries with it the same legal requirements as for
any conveyance of land.
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Sometimes the leases vary a great deal, and each has to be
considered individually.
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There are
costs involved in forming a company limited either by shares or guarantee,
and dealing with the Articles of Association.
The moral of this story
is clear: all potential leaseholders should request an estimate of the legal
costs before appointing a solicitor, with an explanation of what is
involved.
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| laterlife interest
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