Buying the freehold

Many individuals who lease a flat are not aware that they can buy the freehold from the landlord.  If the landlord is thinking of selling the property, he must first give the leaseholders the right of first refusal, or, if enough of the leaseholders want to buy the freehold, they can group together and force the landlord to sell it to them, even if the landlord doesn’t wish to sell. Although you might have considered buying the freehold before, did you know that you can ask the landlord to sell it to you at any time?

Buying the freehold is a very different process to the normal conveyancing process of buying a freehold property. It can be a much longer process and can sometimes take up to 12 months whereas buying a freehold property can be done a lot quicker, eg within a couple of months.

What is the freehold?

There are two types of main ways in which to hold land by law; either freehold or leasehold. For the purposes of this article, we will focus on freehold which essentially grants whoever owns the land complete ownership of everything within that piece of land. It is, however, worth noting that you are also responsible for the maintenance of the structures within the land.

When the Leasehold Reform Act 1993 passed it gave flat owners the power to all go together to force the sale of the freehold of their building.

What this means is that if you are a leaseholder, subject to certain qualifying criteria being met, you are able to purchase the freehold of the property. If you own a flat, the leaseholders can similarly group together and buy the freehold from the owner, or they can group together with other leaseholders for the ‘right to manage‘ their building. This article will discuss the consequences and benefits of buying the freehold. It will also discuss exactly how to buy it and how much it will cost.

Advantages of purchasing the freehold

• No cost of lease extensions – When you buy the freehold, you can usually extend your lease to 999 years for nothing, apart from any legal fees.
• It is you who controls service charge – This means that you decide the quality and you can choose value for money.  So you can decide to do it to a very high standard, or you can choose to do it more economically.
• There is no ground rent – You do not pay ground rent as you will effectively be paying yourself.
• There will be less conditions, leases can come with a lot of conditions.
• You can add value to your home – When you come to sell it, buyers generally prefer share of freehold flats to leasehold as they will know they have some control over how the building is run and maintained.

Disadvantages of purchasing the freehold

• Significant costs – both in terms of the amount you will have to spend on buying the freehold, and the legal costs of going through the process.
• Time – Buying a freehold will not happen overnight.  The process can take up to a year
• The lease stays the same – Any conditions within the lease will stay the same even when you purchase the freehold. You must, therefore, ensure that any poorly drawn leases are suitably redrawn at the time,
• You could take on responsibilities. For example, if the lease says that the outside wall needs painting every 5 years then you will have to complete this. Depending on the lease this could be costly.

Is it worth buying my freehold?

This is will depend on your situation. There can be a lot of work and responsibility to owning the freehold so ensure that if you do buy the freehold you are prepared to take this on. However, it can end up being a good investment if you are in a position to raise the money for the purchase price and the legal costs.

Where the leases concerned are part of a block of apartments, the process of triggering and purchasing the freehold is known as collective enfranchisement. This is a more involved process than when purchasing the freehold of a house. You can find out more details on collective enfranchisement on the Lease Advice service.

How to buy a freehold

There are several steps that must be taken to buy a freehold.

• As a flat owner, you will be notified by the freeholder that it is for sale. The freeholder must offer flat owners the chance to buy freehold before they can sell it to anyone else. It is a criminal offense not to. Flat owners may receive a notice from their freeholder informing them that the freeholder wants to sell and the price that is being asked. There is a very strict timetable and if you do not accept in time, the freehold can be sold on the open market. So, if you get a notice or find the freehold was sold without giving you notice, contact a solicitor immediately.
• Find a solicitor. Expert advice is necessary, and a solicitor will help to prepare and serve the initial notice, negotiate a final price, amend the leases and deal with the transfer of the freehold from the owner to a company set up by the leaseholders.
• Value the freehold. The next step is to value the freehold. You will need to hire a chartered surveyor who is an expert in collective enfranchisement to give a valuation a best and worst valuation, using local experience.
• Set up a company.
  If you are purchasing the freehold of a block of flats, then you might want to set up a company.
• Negotiate the price. Your solicitor may informally approach the freeholder first and if they agree, your legal costs may be slightly cheaper. If this doesn’t work, they will issue an initial notice, stating your offer, which every participating leaseholder must personally sign.
• From the moment the notice is served, the leaseholders are liable for the freeholders’ reasonable legal and valuation costs, so ensure the notice is correct and complete.
• If a price can be agreed upon, then the transaction can proceed. If not, the leaseholders may have to go to a First-Tier Tribunal for them to decide on the appropriate price.

How much does it cost to buy the freehold?

The majority of the cost is the share of the freehold itself. There is no set price. It will depend on the lease’s length, flats’ values, and ground rent. It also rests on negotiations and the surveyors’ valuation. The shorter the lease, the higher the cost.

As a rough estimate, 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.

You must also be aware that any legal fee, valuation fees, and stamp duty fees will also need paying.

If you are thinking about buying the freehold of the building that you own a lease in, please contact us for legal advice on what your options are and how you should proceed.

Disclaimer – our articles are designed to give you guidance and information.  There is no substitute for proper direct advice, particularly as everyone’s circumstances are different.  If anything in this article may affect you, please contact us for advice that is specific to your circumstances.