Wednesday, May 24, 2006

I don't know who Laura Brady on the Guardian is, but she wrote a ridiculous piece in yesterday's paper about flat freeholds which was riddled with inaccuracies.

First, the freeholder is not "otherwise known as a landlord or managing agent". The freeholder is the landlord, and they appoint a managing agent, who the tenants pay for.

Second, they are not "likely to charge ground rent as you do not own the plot that the property stands on" - they will charge ground rent, because it will be in your lease.

Third, "An ideal lease will extend to 99 years, although 125 and even 999-year leases are also available" - not true. An ideal lease is as long as possible, and ideally longer than the marriage value of the lease, otherwise it'll cost you a fortune to enfranchise.

Fourth, "Under normal circumstances, a freeholder is legally obliged to extend it [the lease] for a further 90 years at a "reasonable" cost to the leaseholder. However, this cost is based on the value of the property and can run into thousands of pounds." Well, kinda true, but no mention of the massive Leashold Reform Act which means landlords automatically have to enfranchise tenants if they meet minimum criteria. There's a formula and a process, so it could cost thousands, but it might cost hundreds.

Fifth, "When buying a flat, your solicitor will investigate the adequacy of the existing lease term. "You should be looking for at least double the term of your mortgage," says Nicholls. "Anything below this and you may find it hard to find a lender." Not as I understand it - I don't think lenders will want to lend on anything less than about 65 or 70 years. And no mention of the impact of a short lease on resale value.

Sixth, "share of the freehold...these properties are usually in small apartment blocks or converted houses, with a maximum of five separate flats in the building." I could be wrong, but I think I've seen share of freehold properties in mansion blocks. I don't think there's any maximum.

Seventh, "as freeholds are expensive to buy and are traded among investors, a share of it can boost the value of the property." This is patent rubbish. Since the reforms in the leasehold legislation, the bottom has totally fallen out of the freehold market, they are no longer traded, as far as I can tell, and because landlords are effectively forced to sell to tennants who want them, there's no real market value.

Eighth, "on the other side of the coin, decisions regarding the communal areas, structure of the building and even insurance are all made collectively. If personal disagreements emerge with the small group of other freeholders, the situations can become difficult." Well, all potentially true, but no mention of enfranchised tenants appointing their own, cheaper managing agent.

Ninth - and this is getting silly now - "If you buy a flat in such a small block as a leaseholder, you may be able to join forces with the other flat owners to buy the freehold from your landlord in a process called enfranchisement." It's not just about small blocks, and why only one mention of a key reform?

Tenth, in relation to commonhold, "on the downside, everyone in the building is collectively responsible for the cost and upkeep of all communal areas - even for eventualities such as replacing the roof, he adds. "They are also responsible for the insurance of the building and well as their own contents insurance." That's not a downside, it's reality. If you're in a leasehold flat, you have to pay what the Landlord's managing agent says you should pay, unless you want to fight; if you're in share-of-freehold (ie enfranchised) you have to pay, and if it's commonhold, you have to pay. Whatever your circumstances, someone, and it's generally the people who live there, has to pay for buildings insurance and general maintenance.

Now, this is not a totally researched comment, it just comes out of my head, so I can't vouch for total accuracy, but I'm da*n sure I know quite a bit more than Laura Brady.

How? I hear you ask. A combination of common sense and bitter experience. But that's another story...

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