If you are a landlord looking to draft new leases it is important to draw up your leases so that they freehold is attractive to buyers.
If you are a landlord looking to build a block of flats you are probably not too bothered about the way the leases are drawn up. The most important point from your point of view will be selling the flats with the minimum of fuss. But if you spend a little time and do some research you will find that you can sell your flats with a good lease that pays the landlord a fair ground rent that will increase over the term of the lease.
We have given a very brief example below of two contrasting leases. The example assumes the block comprises of 20 flats.
A. Ground rent for each flat is £100 per annum and is fixed for the whole term of the lease. Leaseholders manage and insure the building.
B. Ground rent is £250.00 per flat and doubles every 25 years. Freeholder manages and insures the building.
If you have not been receiving good advice you may have opted to have your leases drawn up as per example A. If this is the case your ground rent would probably be worth circa £26,000. If on the other hand your leases have been created as per example B the value of the freehold would be circa £100,000. Now if you consider the difference in the value of the freehold there is a big difference in what the building will sell for. The leases will not be any harder to sell but you will make an extra £74,000.
It is just a question of getting the correct advice. Most freeholders don't really consider the value of the freehold interest as they just want to sell the flats. However once all of the flats are sold it would be much nicer to make an extra £74,000 by just wording a lease slightly so that you benefit.
If you are a landlors selling ground rents in London please go to the dedicated page.