Freehold Purchase – An Introduction
Buying your freehold adds value. Purchasing the freehold of your flat is a shrewd move because flats with freeholds are more attractive to buyers, AND lenders, than leasehold flats.
We a freehold purchase company who can advise you through the process.
But What About My Flat?
You’ll be asking yourself two key questions. One, how much to buy my freehold? And two, what will my flat be worth after?
We can tell you if you send us:
1. the number of years left on your lease,
2. the current value of your flat, and
3. the annual ground rent.
Send us a quick email at [email protected] or use the enquiry box and we’ll give you an indicative quote within 24 hours.
The really good bit about freehold purchase (also called collective enfranchisement) is that the cost of buying your freehold is usually less than the increased value of your flat, with its new freehold. So for example:
£5,000 to buy the freehold and then, after you have bought the freehold, your flat increases in value from £215,00 to £222,00.
Plus once you have purchased the share of freehold you have complete control. You can now hire and fire the block managing agent. And there’s no more ground rent.
It's easy as A, B, CThe Leasehold Reform Act 1993 gives leaseholders the right to forcibly buy the freehold from their landlord. The following explains A: why do it, B: how much it will cost, and C: how to do it.
A: Why buy my freehold?
1. Free alternative to lease extensions.
Buying the freehold means you effectively get a lease extension thrown in.
2. Freedom from your freeholder
Freeholders sometimes overcharge for work. They often choose services and insurance policies that pay them the most commission. You can go to the Leasehold Valuation Tribunal to challenge unfair charges but it costs £1,000s.
And you have so much more control when you own a share of the freehold. Of course, you still need to pay for services like maintenance, cleaning, and gardening, but you get to select the contractors.
3. Add value to your flat
Flats with share of freehold are valued more highly by lenders, buyers, and valuers.
“I bought a share of freehold in two properties & would definitely do it again…having a share of freehold upped the value of our flat considerably…we had suffered poor managing agents, and it was a huge bonus to take control of the management…we gained control over maintenance expenses” Mary B. Ilford 2010
Pros and Cons
• Free lease extensions – buy the freehold and effectively you get the lease extended for free.
• You control service charges – you choose value for money, quality providers.
• It adds value to your home – lenders and buyers prefer share of freehold flats to leasehold only flats.
• No more ground rent
• It can be costly – but buying a share of the freehold will ultimately add value.
• It takes time and effort- you have to be committed.
• Director responsibilities – Directors will have to arrange insurance, organise maintenance, recover service charges and have responsibility for Health and Safety.
• Disagreements – neighbours can fall out. Reaching consensus can be tough.
B: How much will my freehold cost?
There’s no set price. It mainly depends on lease length, flat value, and ground rent. If you have this information to hand just fill in the box on the right and we’ll give you an indicative cost range. Free, and in 24 hours.
Remember the cost you pay in the end will depend on negotiations with your freeholder. That’s why we give you an indicative range.
As a general guide the cost of a share of the freehold for one flat (excluding legal fees) is similar to the cost of extending a lease by 90 years. And usually the shorter the lease, the higher the cost.
80 is the magic number…
There is a number of years below which freeholds become much pricier to buy. That special number is…80. If you let your lease drop to 80 years or less ‘marriage value’ kicks in and freeholders can make more cash when selling the freehold.
So if your lease has 85 years left, it’s time to seriously consider buying the freehold.
And once you get below 80 years left on the lease the cost of buying the freehold starts to increase at a faster and faster rate.
Other costs to factor in
As well as the cost of the freehold, you pay a few other fees:
• Legal fees – Legal costs vary hugely, depending on the situation’s complexity. Usually the more flats that take part, the cheaper your individual legal costs. This is because the time spent is similar, regardless of whether there are two or 20 flats. Costs will be more if you go to a Leasehold Valuation Tribunal, though this is not usually necessary.
• Valuation fees – A registered valuer will need to value the flat and freehold.
• The freeholder’s fees – You’ll need to pay the current freeholder’s reasonable valuation and legal fees. If you feel the freeholder’s fees aren’t reasonable you can take the case to the Leasehold Valuation Tribunal (LVT).
C: How do I buy my freehold
The process can take up to a year, more if the freeholder is unhelpful.
The Qualifying Criteria
To Buy Your Freehold you need at least two flats in the building, a lease longer than 21 years, and at least 50 per cent of leaseholders to take part. Plus
• the building must be self-contained or be part of a building which is capable of being self-contained,
• at least two thirds of the flats must be owned by qualifying tenants,
• no more than 25 per cent of the building can be used for non-residential (commercial) purposes and
• you must have owned your lease for more than two years.
Buying your freehold in steps
1. confirm your home qualifies
2. organise a Registered Valuer
3. set up a Participation Agreement
4. prepare and serve the Notice
5. the Landlord (the freeholder) may serve a counter Notice (within two months)
6. negotiations begin
7. the case may be referred to the LVT if the price cannot be agreed
8. complete the freehold purchase and get ready to manage
Freehold Purchase - Help And Advice
Freehold purchase can be complex. Specialist advice from experts is strongly recommended. But whatever your circumstances we can help.
Your Home Property Management would be delighted to oversee the whole freehold purchase process for you. Our fees
Remember our mission is to simplify leasehold law. So for plain speaking, friendly advice on freehold purchase please do not hesitate to get in touch.