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The process of buying the freehold is called enfranchisement, though the ins and outs of the process will vary depending on your situation. If you own the leasehold of a house you’ll be looking to buy the freehold to the home outright, whereas if you own the lease to a flat you may need to club together with other tenants to purchase a share.
As a leaseholder you have a range of rights relating to buying the freehold and managing the property. Buying a freehold can be a complex affair, so it’s important you have the expert advice of conveyancers to guide you through the process.
This guide will explore the different ways you can purchase the freehold, as well as options for extending your lease or managing your property.
To begin with we’ll look at the process for buying a freehold of a house. Leasehold houses are relatively uncommon, especially compared to the large amount of leasehold flats available. The good news is that you have rights to buying the freehold as the leaseholder of a house. You can discuss buying the freehold with your landlord at any time, and if you agree on a price the process will be relatively simple.
If the landlord is open to the informal route, you have the right to acquire the freehold if you meet a range of criteria. You can ask the landlord if they will sell you the freehold at any time.
You have a right to purchase the house and premises, which means the home itself and any external areas that have been included in your lease, like a garden or garage.
The process is called enfranchisement.
To be eligible:
It should be noted that buying the freehold of a house will vary depending on your circumstances and other factors.
You’ll serve a standardised tenants notice on the landlord, and likely receive a notice in reply. The main sticking point will be on agreeing the price of the freehold, in which you’ll need the services of a Chartered Surveyor. You should compare surveyors so you get the best deal for this.
It will take a lot longer to buy if you end up taking the formal legal route, in many cases more than a year.
There is no fixed price for buying a freehold of the house. You will have to pay for the property valuation by a Chartered Surveyor, which will vary depending on the surveyor and the lease's lengths. In terms of the freehold cost, this will be set in your negotiations with your landlord, but you shouldn’t expect to pay any more than the fair market value. If you’re pursuing formal channels using the Leasehold Reform Act 1967, you can get an independent price set by a tribunal.
We’ve covered purchasing the freehold for houses, but what about flats? Leasehold houses are relatively uncommon, whereas the majority of flats in the UK are leasehold. Leaseholders are tenants of the flats on long leases, and the freeholder is the overall owner of the building. We’ve covered in detail the relationship between the leaseholder and freeholder in our guide to freehold and leasehold.
Because of the nature of a block of flats, in which multiple tenants are contained within one building, purchasing the freehold is certainly different to the process for a house. Depending on your requirements there are avenues for tenants to purchase a share of the freehold, or take over the on-going management of the building.
Here’s a rundown of the different options available to you:
The concept of Collective Enfranchisement is simply the different leaseholders in the flat pooling together to purchase the freehold. This means every participating tenant will own a share of the freehold of the building.
Owning the freehold outright as a group of tenants will allow you to extend your lease and get rid of ground rent. You could extend your lease to 999 years, which will add value if you are looking to sell in the future. You’ll likely want to appoint a property management company to deal with services like maintenance and cleaning communal areas. But you can also form a tenant association to deal with these aspects of the lease.
To be eligible:
At least half of the tenants must join together through Collective Enfranchisement, and will usually form a company with an agreement between participating tenants. You’ll need to find an experienced property solicitor and RICS Chartered Surveyor to deal with the legalities and valuations respectively. Remember you’ll have to pay for the freeholder’s legal fees too.
If you don’t want to go as far as creating a tenant association to purchase the freehold of your property, you do have the option to take over the everyday management of the property. Much like Collective Enfranchisement, a group of tenants will need to set up a company to take over the management of the property. You won’t have to prove that the landlord has done a bad job of managing the building, it truly is your right regardless of the quality of existing management.
You’ll manage the reserve funds, service charges, and can appoint a property management company to deal with everyday management if required. The Right to Manage gives tenants much more of a say in how their building is run, though the landlord will be entitled to be a member of the management association. It is not without its complexities, and you will need the expert advice of an experienced property solicitor. Get detailed advice about the Right to Manage here.
If your landlord is looking to sell the freehold to a third party, leaseholds will be offered the right of first refusal. In a nutshell, you’ll get the opportunity to buy the freehold before it’s put on the market. The landlord will put together an offer and set the price, and cannot offer the freehold to a third party for less than the price set out.
It’s a criminal offence for an eligible landlord not to issue a notice.
The Right of First Refusal is still valid if the freehold is being sold after the landlord’s death or because of bankruptcy. Tenants of social landlord or local housing authorities won’t get the Right of First Refusal.
If your lease is below 90 years, it will be costly to extend the leasehold. In this circumstance, it may actually be cheaper to purchase your share of the freehold. Plus, once you’ve bought the freehold you’ll be able to extend the lease to 999 years for free. Extending the lease in this way would add value to your property, which should negate the cost incurred.
If you have an extremely long lease, then buying the freehold might not be financially worth it. Though if you’re paying extortionate service fees or ground rent, purchasing the freehold share would be a logical choice.
If it’s a question of control or bad management, using your Right to Manage will be the cheapest (free) option compared to purchasing the freehold. Whether you’re extending your lease or buying the freehold, expect legal fees of at least £1,500 to guide you through this complex process.
This will be based on a range of factors, but generally you’ll be able to purchase the freehold at a fair price if you’re eligible. You’ll need to employ a chartered surveyor to value the freehold, plus you’ll have to fund the legal costs for you and your landlord.
Purchasing the freehold can spiral in extra costs if you have to take legal action to prize the property from your landlord. Legal costs will mount if the agreement is not amicable, especially if you have to go to tribunals to achieve a decision. On the other hand, if the landlord is open to an offer costs will be predictable. Find a rundown of the cost of conveyancing here.
Legal costs will be at least £1,500, and a valuation will be around £400.
Purchasing your freehold or extending your leasehold can be very complex, so the help of an experienced property solicitor is a must. Use Compare My Move to compare up to 4 licensed conveyancers and property solicitors in your area by filling out one easy form.
We can also connect you with RICS Chartered Surveyors if you need an independent valuation of the freehold.