Q. My Docklands apartment is reaching 80 years left on its lease, which I have been advised, presents mortgage problems for future buyers. In response the management company is offering leaseholders a new 99-year lease extension (for about £10,000) or the freehold (for about £20,000). Is there any material benefit to owning the freehold to an apartment?
A. Yes 80 years is uncomfortably low for a lease and definitely at this stage you would be wanting to do something as you will encounter all sorts of issues as a backlash of a low lease if either selling or from a mortgage perspective and naturally this will be a concern not just to you as the owner but also to any future buyers too. If as you mentioned there is an opportunity to buy a share of the freehold then this is usually advantageous if you intend to keep the property for some time, but on the other hand if you plan on selling sometime soon then I’d opt for the cheaper option as it won’t make that much difference to a buyer and with less financial cost to you. However if you plan on keeping the place for a while then the share of freehold is an attractive proposal as it will mean that you have some control over how the estate is run and there will be no ground rent to pay either. Legislation has made it easier for leaseholders to take control and buy their freehold; effectively you are ridding yourself of the freeholder. This can be done by executing a legal process called collective enfranchisement, which gives you the right to get together with other leaseholders to buy the freehold for a fair market price. This underused right was brought in by a 1993 law, and boosted by the Commonhold and Leasehold Reform Act 2002. So things like maintenance costs and high insurance premiums often charged by managing agents could be a thing of the past. It’s important to realise a flat with a share of the freehold differs from a freehold house. Apartment owners with a share of the freehold own the freehold jointly with the building’s other freeholders. Owners with a share of freehold still have a lease; so they could still need to extend usually for 999 years (though it should be free).