Leasehold Property Management
Freehold interest - extracting value
Many developers and builders of blocks of flats underestimate the value to them of the freehold interest in a building after they have completed a project and let all of the flats on long leases. Most modern leases are usually granted for a period of either 99 or 125 years at a ground rent of approximately £200 annually doubling at regular intervals. This is a guaranteed return that can easily run to a couple of thousand pounds depending on the level of rent.
How complex is the process?
With so many pitfalls in managing blocks of flats it is easy to see why many developers are reluctant to continue managing a block following completion of the build. However, it is very simple to transfer management of a block to a specialist management company to ensure compliance and the developer will continue to benefit from the ground rents every year. There are other means by which to extract value from freeholds such as incentives paid by buildings insurers which can, depending upon the size of the portfolio, be substantial. It is not necessary to disclose these incentives and they do not need to be deducted from the insurance premium that is payable by the leaseholder, meaning a further gain for the freeholder.
Alternatively, if the developer is very keen to dispose of the interest following completion of the build, there is large market for acquiring ground rents and such interests are frequently traded at auction houses. We are able to provide advice on how to go about selling the interest at auction to ensure compliance with the statutory requirements and to ensure that the majority of the costs of disposing of the interest are covered by the buyer.
Solicitors or debt recovery
Solicitors frequently act for freeholders/developers in the sale of such interests, both at auction and by contract and provide a comprehensive service should you decide to sell the freehold following completion of the build. Alternatively, should you choose to continue to manage the block, through a debt recovery department.