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Buying the Freehold of a Leasehold Property.

See update July 2017

The logic of leasehold is hard to understand at times, that you can buy a home but not own the land it has been built on, and in addition spend money each year on service charges that can be viewed as unfair on occasion, not to mention the costs incurred when extending your lease.

This guide will look at the law that allows the leaseholder to force the freeholder to sell the freehold or take control of the management of the property.

Why should you try to buy the freehold?

If you own a leasehold property with a short lease you could be facing a bill of £1000's when you come to extend the lease, in addition to the ongoing charges such as ground rent and service charges, and it can all add up to a substantial amount of money.

If you own the freehold you can normally increase the lease for free, with just the administration costs to pay.

Most leasehold properties come in the form of flats; if you are to buy the freehold it will, therefore, be a joint purchase with the other flat owners. When you are looking to extend your lease, especially if the lease term is in excess of 80 years, you should be considering buying the freehold as the cost will be similar.

If you are looking to extend your lease refer to our guide on extending leases.

Should I buy the freehold of my property.

There are many advantages to owning the freehold.

Putting you in control - there have been some horror stories about freeholders that have insisted that work is undertaken and paid for by the leaseholders, with the work being undertaken by builders that you have not instructed and at a price you have not been able to negotiate; the same can be said for the insurances on the property over which you do not have control.

Increase in property value - if your lease only has a few years left to run this can put off lenders for any potential buyer, and can also put the buyer off. If you do get a buyer they will most likely have to pay more for the survey and your legal fees can be more when compared to a freehold property.

So how much does it cost?

There is no set cost to buying a freehold; there are a number of factors that come into play, the main one being the length of the lease. If you have a short lease the cost will be higher.
Additional factors will be the value of the property and rent. But, as mentioned, the cost to extend your lease versus buying the freehold, if your lease has 82 years remaining, will be about the same, so it's worth investigating.

When sitting down and working out the costs you should speak to a surveyor for a quote and likewise solicitor.

The cost of buying the freehold is worked out taking into consideration a number of factors.

Ground rent

Term left on the lease - if your lease has less than 80 years remaining you will have to pay 50% of the increased value your property, were to become freehold - this is termed as a Marriage value, and is a good reason to act fast if your lease is only just in excess of 80 years, as you will not pay the marriage value in your purchase.

You will be liable for other costs as well; the freeholder's legal fees, stamp duty (if in excess of the stamp duty level) valuation fees, your own legal costs, but don't let that put you off as the rewards can often outweigh the costs. For full details of costs speak to a solicitor.

Also if you need help paying for this and have a mortgage, speak to your mortgage company to see if they will be willing to add the costs to the mortgage.

So what should you do?

First make the decision to go ahead, easy if it's just you but if you live in a block of flats you will need half of them to agree to do it with you before you go ahead.

Speak to a solicitor, we would recommend you speak to three firms, the reason for this is because its good practice but also, you may need to justify your decisions to the others involved in the purchase.

To find a solicitor use the search at the top of the page and select conveyancing as the area of law along with your location.

Obtain a valuation - once again, before you do, gain everyone's approval on the surveyor you use and how the payments will be made for the service, this can be £500 per flat so it can add up quite quickly.

Agreeing the price - your solicitor will normally approach the freeholder about the purchase. If they agree at this point great, but more often than not your solicitor will send a notice with your offer price, when this is sent you are then liable for the freeholder's legal fees. They may decide to accept or send in a counter offer. If you can't agree on the price you can ask for the cost to be set via tribunal.

Important note - undertaking the purchase of a freehold may take some time and if you only have 80 years left on your lease you will likely not complete the transaction until the lease is less that 80 years old, therefore the ideal time to purchase the freehold is around 82 years.

Residential Property Tribunal contacts.

London Tel: 0207 446 7700
Manchester Tel: 0845 100 2614 or 0161 237 9491
Birmingham Tel: 0121 681 3084
Cambridge Tel: 0845 100 2616 or 01223 841 524
Chichester Tel: 0845 100 2617 or 01243 779394

Should I buy the freehold of my property.

Update July 2017

Because of the rise in unfair charges on new homes being built as leaseholds, the government is to undertake a public consultation with a view to introducing a ban.

Under the new plans, the government will seek to dramatically reduce ground rents and outlaw leaseholds on new build homes.

Houses are normally built as freehold properties, but over recent years there has been a trend to build properties and sell them as leasehold, as a leaseholder you will normally pay a ground rent but on top of this you can be liable for many other charges such as management of communal areas and administration charges for alterations.

Around 30% of all leasehold properties are now houses.
The consultation will last for eight weeks and covers only properties in England.

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