5 step guide to buying your freehold11.07.2017
The UK leasehold-freehold system is now embedded into our housing market; almost all whole buildings are freehold, while the majority of flats are leasehold. Yet, many property owners do not have extensive knowledge of this, at times, perplexing framework. So, if they’re not happy with their lease terms – highlighted as a top concern this year – or they want to gain control of their property by becoming the freeholder, they don’t always act on what they are entitled to. Our professional services team have created the following guide to help you take action.
Who can buy their freehold?
You have two legal rights: you can either extend the lease to cut your ground rent bills if you’ve been the owner of a leasehold flat for more than two years, or buy the freehold altogether - also known as enfranchisement. No freeholder can stop you exercising these rights.
The process typically takes a year or less to complete, but be warned: buying your freehold requires patience. You may be legally entitled to the freehold, but the existing freeholder can stall the process. Success depends on the cooperation of others.
Buying your freehold: to qualify you must:
- Own a flat in a building with at least 2 qualifying flats
- You must join forces with a minimum of 50% leaseholders in the building
- Live in a building which is mainly residential - if part commercial a complex floor area rule comes into play
Speak to our professional services team for more information on this.
Reasons for buying your freehold
Reduce long-term costs – freeholders don’t pay ground rent. You’ll also be in control of service charge costs and management costs. You may find that your buildings insurance is also reduced, and if the lease term is extremely low, you MAY find that it’s cheaper to buy the freehold rather than extend the lease.
Lifting restrictions – Leasehold contracts often come with a whole series of conditions to adhere to, from letting the flat to keeping pets which are lifted once control is yours.
Stability – As the freeholder, you’ll have control over management and maintenance of the property, and you also won’t be in the firing line for unexpected changes, such as ground rent and service charge increases. The owner of your property can also sell your freehold to another party, who may ask a larger sum to buy, so check who still owns the freehold when you come to buy.
Increasing the value of the flat – You may have heard about the magic 80-year rule. If your lease term dips below 80 years, extending your lease and buying the freehold may become more expensive. However, it’s worth doing to retain or increase the value of the flat.
For more information, read our Rightmove blog: Flat Owners – Lease extensions vs buying your freehold
How to buy your freehold in 5 steps
So, if you decide that buying the freehold is the best option for you, the process can be broken down into five bite-sized steps.
· Team up with your neighbours
You must rally together at least 50% of the building in order to have a joint share of the freehold. Usually, the more flats that take part, the cheaper your individual costs will be. Provide an estimate of how much it will cost them and the benefits, if they don’t know already, to persuade more families to join the cause.
· Find a solicitor
The process will require expert advice, negotiation and amendments to existing contracts. Place the responsibility with a specialist solicitor to avoid unnecessary costs and wasted time.
· Value the freehold
Seek advice from a specialist enfranchisement chartered surveyor who will be able to give you an informed view of the price, the apportionment between flats, the issues and whether the building qualifies or not.
· Set up a limited company
Buying a freehold collectively involves extra responsibilities, including setting up a limited company. This involves filing accounts, electing a nominee purchaser, i.e. a spokesperson for the group, and elected directors. If you volunteer to become a director, consider taking out directors’ insurance to protect yourself from liabilities. Your solicitor will help you with all of the above.
· Seal the deal
Your solicitor or Valuer can approach your freeholder informally with an offer, which could lower your legal costs straight away, if they agree. If this doesn’t work, you will have to issue notice formally, which every leaseholder must sign – this is binding.
The freeholder then has two months to reply, otherwise you can buy at that price. However, they can then come back with a counteroffer which you can take or leave. If you can’t reach an agreement, or the freeholder stalls the process, you can go to a First-Tier Tribunal.
Talk with us
If you are interested in buying your freehold, or would like to know more about the pros and cons before you buy, we can offer you clear and professional specialist advice. Contact our leasehold advice department for a free preliminary consultation on 01273 20 19 88 or fill in our quick online form under ‘Email Us’ and we will respond within 24 hours.