09 Jan FREEHOLD PORTFOLIO
All land in England and Wales, whether or not it is registered at the Land Registry, has a Freehold Title.
The Freehold Title, may be subject to a Lease, such as in a flat or block of flats, who have the right to occupy the property, for the term Lease, paying an annual Ground Rent, Service Charge and Maintenance Fees.
This Freehold Reversion Title, can be bought and sold as an investment and can be a financially rewarding form of investment opportunity, if handled wisely. There are a number of ways of making money from your Freehold Reversion, which are detailed below:
- Collection of Ground Rent: As the owner of the Freehold, you will be entitled to receive the Ground Rent, payable. There may be a mechanism in the Lease, to increase the Ground Rent periodically. Typical Ground Rent, can be £150 per flat.
- Pre-Sale Enquiries: When a Leasehold property is to be sold, the Purchaser’s Solicitor, will raise enquiries with you as the Freeholder, requesting information. Supplying this information, is normally at a charge, there is no actual fixed fee, although an average fee, is around £150.
- Assignment Charges: On every Assignment of the Lease, (i.e. when the Leasee intends to sell), the Purchaser’s Solicitor, must serve a Notice on the Freeholder, as to the change of ownership and the Freeholder is usually entitled to charge a fee. A reasonable fee is around £50, for Notice to Assign and a further £50, when the Purchaser buys with a mortgage, for Notice of Charge.
- Granting Consent to Alterations: Most Leases require the Leaseholder to obtain the Freeholder’s consent, before carrying out any alterations, particularly structural alterations. Typical fees can be around £400, as the Freeholder may choose to instruct a surveyor, to assess the work and ensure that the structural stability of the property is not compromised.
- Lease Extensions: As the Freeholder, the financial reward for a 90 year Lease Extension, will be at a premium, dependent on the number of years remaining on the Lease and the Ground Rent payable.
- Management Charges: As a Freeholder of a block of flats, you will be arranging repairs and maintenance of the communal parts. As a reward, the Management Charge can be 15% of the total Maintenance Charges.
- Block Building Insurance: As a Freeholder, you will usually be responsible for arranging Building Insurance for the block. Normally, you will receive a commission from the insurer, of possibly 15% of the premium.
If you are contemplating purchasing a portfolio of Freehold Reversions, which frequently are available at Auctions, seek professional advice from your Solicitor and an RICS Chartered Surveyor, before committing to a purchase. Fees and percentages detailed, are only a guide, as there will be regional variations.