A two hundred year old mystery   

Currently, we have agreed a deal in Manchester, a vacant shop and uppers.  We managed to secure the deal because the ‘current’ buyer had been dithering for the best part of a year.  The reasons we have taken the step to step out of the safety of London is simply because one cannot get the same margins here.  This deal in short is being purchased for £300K, with £250K being spent on refurbishment; and has a GDV of £950K.  This is all bread and butter stock.  This will be six flats having a value of £160K a piece.  At this price point one would expect very little deviation, whatever happens to the economy.  At this level of margin, one has the option to refinance and extract the initial funds as well as some profit, and keep the property as a positive cash flowing asset; moving on to the next project, following the same formula.   
  
However, the deal was done on the basis that this was a freehold building.  This is the basis the deal had been agreed upon.  However, further analysis revealed it was a long leasehold.  The lease had been granted nearly 200 years ago, with ground rent being payable; this was even quoted in shillings.   
  
This is an important point, as the aim was to develop the property.  We do not want to be in the position where we do all the work and the freeholder pops up demanding his pound of flesh.   
  
What complicates things further is the lease is not actually directly available.  A search done by us reveals the presence of a lease, a lawyer has been tasked with searching for this information, and examining the implications of the various possibilities.   
  
Given that it had been written nearly a couple of centuries ago, it could be there would be no barriers to change of use, it could have been very loosely worded.  If so, once converted into residential the freehold could be purchased relatively cheaply.  There is also the possibility to get an insurance policy in place which would protect us in the event of the freeholder ever appearing and staking his claim.   
  
We have also carried out a search on the freeholder; he has several hundred companies which own freeholds.  This means he is in the freehold business in a serious manner, probably quite well organised too.   
  
This point will need to be nailed down thread bare before we move on the deal.  There is also the possibility of reducing the purchase price to account for any cost incurred in the purchase of the freehold, as it was on this basis the deal has been struck.  Whether this ends up in a deal or not, this will have been an interesting learning exercise.  I, for one, have not come across a two hundred year old lease.