LTA 1987 Section 5A Offer Notice

[sturose]

Hey guys,

 

My mother has just received a section 5A offer notice for the freehold on her flat and has asked me to get some advice on what this actually means to her.

 

She lives in a block of four leasehold privately owned flats and each of the owners has just received this notice. The lease on the flats currently have about 53 years remaining.

 

One of the tenants enquired a couple of years ago regarding extending the lease but they were quoted £10k+ which they considered to be OTT.

 

Now they have received this notice and my mother wants to know what it will mean to them should they accept the offer regarding their tenancies and how many years they have remaining.

 

I have read on lease-advice.org and sort of understand how they will collectively take over the freehold should they all (or the majority) agree to do so but what is the situation then? Do they still have the remaining 53 years on the lease or do they own the building and land outright? Obviously I know one of them will not own all the land but it seems rather confusing as to how it works afterwards.

 

As it currently stands they are only charged a token rent which they do not actually pay until they sell up and leave. It is a very small yearly figure anyway.

 

They have contacted a solicitor but have not had the appointment yet so any advice would be greatly appreciated as my mother is worrying about this because she has had enough to cope with recently with the death of my brother. I just want to ease her mind so she doesn't have to worry about this issue.

 

I have scanned the letter and removed personal information.

 

[sturose]

Sorry for bumping this but I really could do with some advice as my mother does not know where she stands at the moment. She's a bit worried.

 

Thanks

[stu007]

Hi

 

Have a wee look at this link (The Leasehold Advisory Service) Right of First Refusal: https://www.lease-advice.org/advice-guide/right-first-refusal/

 

Have a good read especially of sections 4, 4.1, 5

[BazzaS]

How much is the block valued at?

Is it likely to need major works doing?

[ericsbrother]

the landlord is flogging the freehold and has to offer first dibs to the leaseholders.

 

If the tenants (leasholders) agree then they become their won landlored in common and become responsible for the management and repair of the property themselves. If they dont do this as a group any individual can take up the offer and if no-one does the the freehold can be sold to another party who certainly will be looking for a retun on their investment, eihter by asking for a massive amount for a new lease or by developing the land furhter ( another storey).

 

I wouild suggest that she explores this offer with her fellow leaseholders or alone fo they arent interested. If the figue of £250 is correct then that is a bargain as any work that needs doing will need doing regardless. On the downside they/she will ahve to set up a management co to organise all of the wotrks in the future, not difficltl unless you have one PITA that wont co-operate in any way

Edited February 5, 2018 by honeybee13
Paras

[sturose]

Hi

 

Have a wee look at this link (The Leasehold Advisory Service) Right of First Refusal: https://www.lease-advice.org/advice-guide/right-first-refusal/

 

Have a good read especially of sections 4, 4.1, 5

 

Thanks, I'll take a look at that.

 

How much is the block valued at?

Is it likely to need major works doing?

 

Not sure about the value of the entire block, 4 flats probably valued in the region of £90-100k each. Fairly modern building, not aware of any major work that is needed.

 

the landlord is flogging the freehold and has to offer first dibs to the leaseholders.

 

If the tenants (leasholders) agree then they become their won landlored in common and become responsible for the management and repair of the property themselves. If they dont do this as a group any individual can take up the offer and if no-one does the the freehold can be sold to another party who certainly will be looking for a retun on their investment, eihter by asking for a massive amount for a new lease or by developing the land furhter ( another storey).

 

I wouild suggest that she explores this offer with her fellow leaseholders or alone fo they arent interested. If the figue of £250 is correct then that is a bargain as any work that needs doing will need doing regardless. On the downside they/she will ahve to set up a management co to organise all of the wotrks in the future, not difficltl unless you have one PITA that wont co-operate in any way

 

So that figure of £250 is the amount that the freehold is being sold for? That does seem very cheap. I believe that the current occupiers will be interested in buying as the lease is running quite short now. It will largely be dependant on whether there are any other things to consider with them collectively taking over the freehold. I would also assume that they will want to so that an outside party who will only be interested in a return on the investment cannot take over.

 

It sounds fairly complex, as stated they are consulting a solicitor to advise them but I just want to gather as much information as possible so my mother won't be worrying too much about this.

 

Thanks for the advice guys, I'll pass this on to my mother.

[stu007]

Hi

 

Another wee link for you to look at:

 

Set up and run a flat management company: https://www.gov.uk/set-up-property-management-company

 

and this one:

 

Right to Manage (The Leasehold Advisory Service): https://www.lease-advice.org/advice-guide/right-manage/#1

Edited February 5, 2018 by stu007

[ericsbrother]

Look they HAVE to offer it to the tenants first so cant see what an outsider will offer until after the tenants have turned their right to buy down.

My advice? buy buy buy if ay all possible.Get the others to agree and form a company to hold the freehold and the leaseholders own it as tenants in common. If the people living there are too stupid to take up the offer then at least those who do and jointly own the freehold can then sell a share to anyone who buys one of the flats taht didnt want to join in> the current holders of those short leases will then kick themselves as they will get bugger all for their flats compared to the value with a new lease and a share of the building.

Also, if the building needs work the new freehold co can get aloan to do the works and every flat then pays into a fund to repay it rather than shelling out a small fortune in one year.

If it is affordable she and the others should go for it.

The cost f setting up a company to manage the property will be around £1000 if you go down the simple route. Raed up on it and then instruct a conveyancing lawyer rather than instructing a lawyer and hoping that what they have drawn up is suitable.

[sturose]

Look they HAVE to offer it to the tenants first so cant see what an outsider will offer until after the tenants have turned their right to buy down.

My advice? buy buy buy if ay all possible.Get the others to agree and form a company to hold the freehold and the leaseholders own it as tenants in common. If the people living there are too stupid to take up the offer then at least those who do and jointly own the freehold can then sell a share to anyone who buys one of the flats taht didnt want to join in> the current holders of those short leases will then kick themselves as they will get bugger all for their flats compared to the value with a new lease and a share of the building.

Also, if the building needs work the new freehold co can get aloan to do the works and every flat then pays into a fund to repay it rather than shelling out a small fortune in one year.

If it is affordable she and the others should go for it.

The cost f setting up a company to manage the property will be around £1000 if you go down the simple route. Raed up on it and then instruct a conveyancing lawyer rather than instructing a lawyer and hoping that what they have drawn up is suitable.

 

At the price they are stating it is definitely possible for them to buy, at least 3 out of the 4 tenants are interested anyway. 4th has not been spoken to yet but I would imagine they also would be on board.

 

As stated, I doubt any major work would be needed because it is a fairly modern block.

 

The letter, as posted was only dated 29th January so they still have almost 2 months to sort it. I'm not sure any of them knows what to do but I've linked my mother to this page and I'll tell her to pass the link to anyone else in the block who needs additional information and they can post here to ask any specific questions.

 

Thanks for the info guys and thanks for the links stu007

[ericsbrother]

there is another way of buying the freehold and that is each flat wns a share of the freehold. Cheaper to manage but you can run into difficulties if one person then refuses to pay thier share of a roof repair for example as ther others have no way of forcing them to pay up.