How Much Does it Cost to Buy the Freehold?

Written by Ashleigh Williams

27th Oct 2022 (Last updated on 11th Apr 2024) 12 minute read

Buying the Freehold Costs

The average cost of buying the freehold is around £6,000. This figure was calculated using the FreeholdCalculator. The figure is based on the value of the house and a share of its marriage value.
It can be calculated by taking the current value of the property, the years left on the lease and the annual ground rent.

Our figure is based on an average leasehold of 99 years, the average UK house price, which is £277,000 and an average ground rent of around £366.

This will vary on a case-by-case basis. This is because it can be vastly different, like house prices. The freehold for a 4-bedroom flat in London will cost more than the freehold on a studio flat in Hull.

Additional Costs:

When it comes to buying the freehold, this will incur several extra costs, some of which you may not have considered. It’s important to have a clear idea of these costs before progressing.

It’s useful to see the advice of a financial advisor that can assist you with your estimated total costs.

Here are some estimated figures and costs to take into consideration:

Valuation Cost

On average, a block containing two flats may cost between £600-£900 to value. If a building contains 14 flats, this may cost up to £11,000. This is based on our collective enfranchisement research.

When buying the freehold, every participating leaseholder will need a valuation on their property. This is known as a Collective Enfranchisement Valuation Report. This report is a key aspect of the process as it provides the leaseholders and the freeholder with an idea of the costs.

The valuation between flats can vary. While flats are in the same building, the valuation can vary due to aspects such as the size and condition of each flat.

A surveyor experienced in this area will need to be hired for the valuation report. The surveyor will look into aspects such as the length of the leases, what’s included with the building, and market value.

Once the valuation report is completed, the surveyor can then calculate the premium each person buying the freehold will need to pay.

Solicitor’s Fees

Based on purchasing 4-5 flats, you can expect to pay around £800 each in solicitor fees. This is based on the average figures taken from Money Saving Expert, Daily Mail, and SAM Conveyancing.

In addition to hiring a surveyor, you will need help from an experienced conveyancer or solicitor. They are often called Leasehold Enfranchisement Solicitors.

The legal fees you’ll need to pay can be significant due to the nature of the process. The cost will vary depending on the number of properties involved. The more properties there are, the higher the solicitor fees will be.

Each flat additionally included will be charged at an extra cost. The more people included in buying the freehold will help to lower the overall costs. This is an average figure and will vary depending on the fees of specific solicitors.

With conveyancing fees, you can expect to pay disbursements and legal costs which include, but are not limited to:

• Bank transfer fees -£40
• Bankruptcy checks - £3
• Transfer of ownership with the land registry - £438
• Freeholder consent - up to £250

Use our Conveyancing Fees Calculator for an estimate

Tenant Agreements

Solicitors are also useful when it comes to tenant and participation agreements. These are worth creating before you buy the freehold. It's a document stating what each person will receive through the deal.

As buying the freehold will typically involve more than two parties, it’s useful to have a participation or tenant agreement in place. It helps to have the process in writing should anything happen during the sale of the freehold.

A solicitor will charge for this on a case-by-case basis. While it’s not essential to have, it’s useful and can help to speed up the process.

Freeholders Fees

A lot of leaseholders may not realise they have to pay the freeholder's fees if you’re looking to buy the freehold. This is why it can become expensive if you’re not already prepared for this.

The freeholder fees include the surveying and legal fees. The cost of the freeholder fees will likely be similar to the average conveyancing fees for selling a house. This cost is around £1,690 based on the average house price of £277,000.

Stamp Duty

If the freehold costs more than £250,000, then you will need to pay stamp duty on the property. Our Stamp Duty Calculator can help you to work out the exact costs of this.

The percentage will be between 5-12% of the remaining part of the property cost, depending on the cost of the property.

This is based on owning a single home. if you have a second home, you’re required to pay an extra 3% in England and Northern Ireland. In Wales and Scotland, this is 4%.

Setting up Company Costs

Setting up a limited company will cost £12.

One way to manage buying the freehold is to set up a limited company. As there will be typically more than one leaseholder purchasing the freehold, it's easier to keep track of this.

Is it Cheaper to Buy the Lease?

A lot of people may assume that extending the lease is cheaper than buying the freehold. However, in the majority of instances, the cost tends to be similar.

Additionally, buying the freehold will typically allow you to save money in the long run on costs such as ground rent and insurance. This is because you’ll be able to choose your own insurance and manage maintenance costs.

The cost to buy the freehold will be higher if there is a shorter amount of time left on your lease. If the lease only has 50 years left in comparison to 900, it will be more expensive as a result.

When you buy the freehold, in most cases the lease extension on the property will then be free. If you only have a shorter amount of time left, you will then be able to extend it to 999 years without incurring any extra charges for this. This excludes any legal fees incorporated into the extension.

While the costs are often similar, buying the freehold is a more complicated process.

How Much Value Does Buying the Freehold Add?

Buying the freehold, on average, will add around 1% value to the property. This increase in price is also known as the marriage value.

If the property is valued at a reasonable price, this can be significant when it comes to equity in the property and selling.

There is also further value in buying the freehold as it can decrease payments and bills including service charges and ground rent.

Stages of Buying the Freehold

There is a process to follow when buying the freehold. Here are the stages you can expect to follow:

1. Research Whether You Can Buy the Freehold

Before you begin the buying the freehold process, first you need to ensure whether you actually qualify for this.

Here is the criteria:

• The leases have to be longer than 21 years
• The building can’t be used for more than 25% non-residential purposes (e.g. offices)
• The building has to be self-contained
• At least 50% of the flats within the building should have agreed to collective enfranchisement. If the block has only 2 flats, both must agree to proceed
• Tenants cannot own 3 or more flats in the block

You will need to have at least 50% of the leaseholders in a block of flats on board to buy the freehold.

If the block only contains 2 flats, both leaseholders must agree to buy the freehold to proceed. Without the correct number of people being in agreement, you’ll be unable to buy the freehold.

Legally if the freeholder is looking to sell the building, they have to offer the freehold to current leaseholders first.

2. Create a ‘company’ of qualifying tenants

This process is more commonly known as a Right to Manage and a limited company is set up for everyone involved.

TThe company can then be used as a way for everyone to be involved in the freehold. Everyone involved can then have an input on any changes whether that’s on property or finances.

While this may seem like an unusual way to help buy a property, it can be useful for managing the freehold.

It helps if there are service charges to pay, or it can be used for general maintenance of the building and communal areas. If there are any disputes, the company can be used to deal with this.

3. Select a Nominee Purchaser

While there will be many people involved in the process, you can select a person to become the nominee purchaser. They will essentially become the new landlord.

This is an alternative to creating a limited company and would be useful if no one wants to be part of a limited company. This person should be someone who’s trusted as they will then represent the freeholders. They will be responsible for the management of the property.

4. Hire the Help of a Solicitor and Surveyor

As discussed, hiring the help of a leasehold solicitor and surveyor is so important. A surveyor ensures the valuation is carried out correctly. They will ensure the legal side of the process is completed. Both parties will be on hand to provide help and advice if needed.

5. Arrange a valuation

The valuation helps to determine what the purchase price of the freehold will be. This provides you with an idea of whether buying a freehold or extending the lease is the better option to consider. The valuation is needed to proceed with buying the freehold.

6. Serving Your Notice

To proceed with buying the freehold, first, you’ll need to serve your notice. These are the steps that need to be followed for collective enfranchisement.

7. Receiving a Counter-Notice

You will receive the counter-notice from the current freeholder after you’ve served your initial notice. This will allow you to proceed with buying the freehold.

Should I Buy my Freehold?

There are both pros and cons to buying the freehold. It’s important to weigh up both options before committing.

Pros of Buying Freehold:

• Less expensive in the long run (e.g. - no maintenance charges or ground fees)
• More control over the property and how it’s managed and maintained
• The lease is typically extended for free
• Similar price to extending the lease but with more freedom
• Less permission to seek

Cons of Buying Freehold:

• Can be a more complicated process if neighbours are in disagreement
• Takes time to set up and complete
• You have more responsibility
• If you set up a limited company you’re relying on others in terms of management and maintenance
• It doesn’t change your lease even though it will be extended typically at no extra cost

Buy the Freehold vs Right to Manage

If a leaseholder wants to gain more control over their property, there are two options to consider - buying the freehold and the right to manage. Both are useful depending on your particular situation, and what you want out of the property.

Buy the Freehold

Buying the freehold is something discussed in detail in this article. It allows a person to buy the freehold of their flat.

This means they then own the property and have more control over things such as maintenance. It’s the best option for someone that wants to manage their own property.

Right to Manage

It’s useful as it provides the leaseholder with more responsibility and control over their property. Even so, the property is still owned by the freeholder.

Leaseholders and tenants do gain some legal responsibility with the Right to Manage. They are able to manage the block of flats instead of the freeholder or landlord.

Like setting up a limited company to buy the freehold, you will need to do this for the Right to Manage. You will also need to cover the costs associated with this.

While it provides extra freedom with your property, it can be more costly in the long run in comparison to buying the freehold.

How Much Does it Cost to Buy a Freehold on a House?

While flats are more commonly leasehold, there are some cases where houses are purchased leasehold. There are some instances where you’d want to buy the freehold of a house to provide you with more freedom with the property.

Similarly to buying the freehold for a flat, the cost of buying the freehold for a house can vary. The size of the house, the condition and the valuation will play a significant role in this. As a result, it’s almost impossible to provide an estimated figure for this.

Is it Worth Buying the Freehold of my House?

Often, it's beneficial to buy the freehold, especially if it’s for a house rather than a flat. It allows you to own the property.

You’ll have complete control of the property. You can decide the amount and type of insurance you pay, and determine things such as maintenance costs.

If you own the freehold of your home, you are in complete control of the property and you will no longer be required to pay ground rent. This will help to cut your overall costs.

How Do You Calculate the Value of a Freehold?

Calculating the value of a freehold is not the simplest thing to do. You will need to know the current value of the property, the years left on your lease and the annual ground rent you pay.

The best way to find an accurate cost of this is by speaking to a mortgage advisor or using an online Freehold Calculator.

A financial advisor will be able to talk you through this value in more detail.