leasehold extension or buying freehold?

Hi,
I own a flat, in a building with just one other flat above. I'm vaguely thinking about moving, but the lease only has about 67 years left on it, so I will need to extend it before going ahead. Assuming the agreement of the other leaseholder, what are the pros and cons of extending the lease or carrying out a collective enfranchisement? Perhaps most importantly, how do the costs vary? The online calculator at the Lease website seemed to suggest that a lease extension of 90 years could cost upwards of 30k, which seems considerably higher than I was expecting (value of the flat currently estimated at about 300k).

Thanks,
Jonathan

Hi Jonathan,

Advantages of extensing lease = usually quicker, as you needn't involve your neighbour, which can slow the process simply by virtue of there being more people involved. However, with just two of you involved, the freehold purchase might not actually take any longer.

Advantages of buying freehold -

1. You share the professional costs (both yours and that of the freeholder).
2. Once you ave acquired the freehold, you can manage it yourselves.
3. You can insure the building yourselves, assuming the leases impose this obligation on your freeholder currently?
4. You can sell your flat "with share of freehold" which is generally regarded as being better for marketing purposes.
5. You have the opportunity to extend your leases to 999 years, reduce the ground rent to zero and generally modernise the lease. With a lease extension, you will only get to increase the term by a maximum of 90 years. Modernising the lease is almost certainly not going to happen if you just go for a lease extension.

You can therefore see there are many advantages for buying the freehold first, then extending your own leases. In fact, unless there was any particular rush, or unless you do not get on with your neighbour, my view is the freehold purchase is the obvious route.

The half share you would pay towards the purchase of the freehold, as a rough rule of thumb, is generally the same as what you might pay as the premium for extending your lease. However, with the freehold purchase route, you share the professional costs, which could mean a saving of a couple of £000.

Regrettably, I cannot comment on whether £30k+ sounds about right, as this is a job for an experienced and qualified surveyor.

I hope this gives you some idea of the pro's and con's of an enfranchisement compared with a lease extension.

Tom