Buying Your Freehold

Flat owners are entitled to collectively purchase their own freehold; this is called enfranchisement. Buying your own freehold overcomes issues of a short lease term on your existing leases. For those flat owners with less than 85 years remaining on their lease this is very important, however, there are a number of other distinct advantages to consider:

Buying your freehold not only increases the value of your flat but means you can exercise real control over your property. After enfranchising, for instance, the choice of how best to insure, manage and maintain your property rests in your own hands. A freehold purchase could also in some cases allow flat owners to enjoy new rights over roof spaces, half landings or external areas and eliminates landlord disputes. 

If you are interested in buying your freehold 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 please use the form on this page and we will respond within 24 hours.

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Frequently Asked Questions

  • Can anyone Enfranchise?

    You need at least 50% of the flat owners to participate, although the more owners who participate the better, not only for the successful management of the building in the future but also because it will reduce the costs for everyone.

  • Why do I need to Enfranchise?

    There are two important elements:

    1. To protect the value of your flat

      When you decide to sell your flat, any lease approaching 80 years or below will create difficulties on sale - (see FAQ’s on Extending Your Lease).

      As leases reduce in length it becomes much more expensive to purchase the freehold.

      Buying your freehold, (if your lease is around 80 years or less), will protect the value of your flat and improve saleability.

    2. To control the management of your building

      Owning your freehold means you have complete control on costs - from redecoration or repairs to the building, to the insurance premium, to managing agent's charges.

  • How much will it cost to Enfranchise?

    A number of factors, including the lease length and the market value of the property will affect the price payable. There is no rule of thumb within leasehold valuation. A professional valuation is required in each case to establish the likely price.

    It should be remembered firstly, that the longer you leave the situation the more expensive it will become and that all of your expenditure will be recovered in the increase in value of your flat, and the cost saving on future service charges.

  • How long will it take to Enfranchise?

    After receiving your Valuation report on Enfranchisement we can advise you on whether an informal or formal approach is the best way forward. If the Freeholder agrees a deal informally, the sale can be conveyed in a couple of months. It is usual, however, for the process to take longer than this.

    Unfortunately, there is often a significant discrepancy between the Freeholders opinion of value and that of the flat owners’ Valuer. In this case, you will need to serve your formal section 13 Notice. The Freeholder has two months from the time you serve your Notice to have the freehold valued by another valuer and to serve their Counter Notice. Once the Counter Notice is served there are a further two months of formal negotiations. The price is, in most cases, settled at this point between the Valuers and you should expect to pay additional fees for these negotiations. In the majority of cases the price is settled at this point. The whole process should take less than six months.

    If the price cannot be settled between the valuers you will then move towards a formal hearing at the First Tier Tribunal. Attending Tribunal has significant fee implications and can be time consuming - It is however, relatively rare to resort to Tribunal.

  • What are the costs in professional fees?

    Our valuation fees are quoted for individually and are dependent on the circumstances - please call our Professional department on 01273 20 1988 for a quote.

    If it becomes necessary to follow the statutory process there are further fee implications which you will need to budget for. As well as your own valuers costs your solicitor will charge you for serving a section 13 Notice. You will also be responsible for your Freeholder’s valuation and legal fees. Lastly, there will be a fee for any formal negotiations undertaken by your Valuer. We can provide you with a quote for our fees on request. Please call us to discuss.

    You should remember that all fees are shared between the participating flat owners - therefore the greater the number of flat owners participating, the lower the fees will be for each person.

  • How is the freehold valued?

    There are three main elements to the Valuation. The first two elements together represent the market value of the freehold. The third element - (Marriage Value) - represents the Freeholder’s share of the profit derived from the improved value of the property after Enfranchisement.

    1. Ground Rent

      After the Enfranchisement the Freeholder will no longer collect ground rent on the flats and needs to be compensated for this loss. All the ground rents over the course of the term are capitalised, but this will depend on whether they are fixed or rising and if rising, how they are based. They are often fixed, but can be linked to RPI or a % of open market value.

    2. Reversion

      At the end of the lease term the building will, in theory, revert to the Freeholder. As the end of the lease gets closer the Freeholder’s Reversionary Interest becomes more valuable - (at the same time your interest in the flats diminish).

      The value to the Freeholder of this element rises steeply as leases fall below 80 years. When you Enfranchise the Freeholder loses his reversionary interest and he must be compensated for this loss of value.

      The level of reversion is worked out using a yield known as a 'Deferment Rate'. This rate has been set by Land’s Tribunal at the case commonly known as ‘Sportelli’. However, there may be factors where this rate is not appropriate.

    3. Marriage Value

          The value of your flat reduces as your lease term diminishes. Enfranchising increases the value, bringing it back up to full market value. This increase in value is called ‘Marriage Value’.

          The Freeholder is entitled to a 50% share of any potential uplift between the short and long lease values.

           There are a number of factors affecting the valuation which will need to be assessed at the property, including the market value of the flats, disregard of lessees improvements, layout changes, valuable common parts, development potential etc. The terms of the leases will also affect the overall valuation. These factors vary from case to case and will be covered in your Valuation report.

  • What is the procedure for Enfranchising?

    The first thing you will need is a Valuation report. We can usually provide you with a full report within ten days of inspecting your property, subject to access to all parts and documents (leases, office copy entries etc).

    After you have received your valuation report we can advise you how best to negotiate the matter. We will always attempt to settle the matter through informal agreement directly with your Freeholder or your Freeholder’s valuer.

    If your Freeholder will not agree to a reasonable level, we will advise you to serve a section 13 Notice. The section 13 Notice represents your formal offer and is the first stage of the legal process for Enfranchisement. Once a Notice is served both sides must adhere to a strict timetable and to rules concerning costs. Austin Gray can recommend specialist solicitors for any necessary legal services, (unless you wish to use your own).

    Your Freeholder is entitled to have the freehold formally valued at this point and he will serve a Counter Notice, (including his Counter Offer, often at a substantially higher level). You are liable for the Freeholder’s ‘reasonable costs’ up to this point.

    After the Freeholder serves his Counter Notice there is a period of two months in which the surveyors from each side will negotiate the price. Many Enfranchisements are settled at this point, however, if an agreement cannot be reached the price will be settled by a Leasehold Valuation Tribunal.

    Once the price is settled your solicitor will form a freehold company and the participants will become equal shareholder’s – this company will then purchase the freehold.