How do I Purchase the Freehold?

If you own a flat, most likely it’s tenure is leasehold. When owning the leasehold there are certain instances in which the leaseholders may opt to purchase the freehold and take the responsibility for day to day management themselves. By doing so, it will allow them to have more control of the properties including their own, allowing the leaseholders to set the terms of their lease extension, service charge, ground rent and other costs associated with owning the property.

This may also affect new build properties which are also more commonly becoming leasehold properties. In these instances, leaseholders may wish to purchase the freehold as a means of protecting themselves from any unreasonable clauses being enforced upon them by their freeholder or landlord.

How to I purchase the freehold?

There are several steps involved in purchasing the freehold:

1. Eligibility - It is important to ensure that you are eligible to purchase the freehold. There are many different requirements which need to be satisfied in order to be qualify.

   • The building must contain at least two flats.

   • At least 75% of the property must be used for residential purposes.

2. Contact Neighbours - Contact your neighbours to confirm if they would like to get involved. At least 50% of the building must confirm they wish to purchase the freehold. If the relationship with your landlord is strained or unreasonable, this may be an easy task.

3. Find the Freehold Cost - We recommend getting into contact with a surveyor for an accurate estimate. It is very difficult to obtains an estimate without and we advise against the use of free calculators online. The property’s freehold tends to be more expensive the longer the leaseholders terms.

4. Budget Well - It is important to factor in all costs involved in the purchase and not just the price to purchase. Besides legal fees there are a host of other fees which need to be considered such as calculation fees and the freeholders fees. Once you are aware of the full amount you will be able to confirm your affordability.

5. Instruct a Solicitor - it is important to note that once you have confirmed your intention to proceed, you must instruct a solicitor. One who is experienced in lease extensions would be preferable. Please contact our team for more help.

6. Participation Agreement - Your solicitor will usually construct a participation agreement which is a confirmation from all the flats who are intending to proceed with the purchase. By doing so it avoids any of the leaseholders from withdrawing from the purchase and increasing the costs for participating leaseholders. This serves as a means for a contract between the leaseholders involved in the purchase and will outline fine matters pertaining the purchase such as the terms for lease extensions amongst other matters.

7. Valuation - Instruct an experienced surveyor to obtain a valuation for the property.

8. Set up a Company - When setting up a company, the costs of incorporations, filing accounts and day to day management needs to be considered. Alternatively a company may elect a nominee purchaser to take charge. A company is preferable as it enforces equal rights and allows any disputes to be dealt with accordingly.

9. Tenant’s Notice - We advise leaseholder to purchase the freehold using the statutory route rather than making a blind offer. Your solicitor will issue a ‘tenant’s notice’ which is the enforcement of the right to purchase the freehold. The notice must be signed by all participating leaseholders and the landlord will respond usually in the means of a ‘notice in reply.’ The freeholders should aim to respond within two months to prevent the matter from reaching court. In their response it should contain their acceptance/disagreement to the purchase and any reasoning. Once they have confirmed, negotiations on price will commence. It is vital that the notices served are correct, in the event they are not you may lose this right and the next opportunity to make another application will be in a years time.

10. SDLT - It is also important to note that purchasing the freehold in excess of £125.000 may attract Stamp Duty Land Tax liabilities.

If a price cannot be agree or if the landlord is unwilling to sell the property, the matter can be referred to the First Tier Tribunal within six months of the notice of reply being issued.

Should I proceed?

Buying the freehold for a leasehold house is much simpler than purchasing for a flat as you do not need a certain amount of other leaseholders to obtain the right. The freeholder will usually object against the purchase as owning the freehold is favourable to them, hence why we recommend using a well experienced solicitor in these matters.

Please visit our buying the freehold guide for further information.