Should I Purchase the Freehold?

Leasehold flats do not own the building and communal area but rather they are owned by the freeholder or land. In exchange for use of, there are charges payable in the form of ground rent, service charge and insurance amongst other fees.

What does this mean?

A right of freehold enfranchisement is for the leaseholders of flats to exercise their joint right to purchase the freehold of their building. The law requires a 50% minimum of leaseholders to collectively pursue the purchase freehold. The leaseholders would then own the freehold building and be responsible for the day to day management of the company.

How can I be eligible?

Exercising your right to purchase the freehold can be complicated. The requirements to do so usually include:

• There must be a minimum of two properties.

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

• 50% of the total number of flats in the building must be owned by leaseholders who intend to purchase the freehold. In flats of two, both leaseholders must comply to do so.

• A minimum of two thirds of the property must be owned by leaseholders who have original terms of at least 21 years granted.

Should I buy the freehold?

Buying the freehold helps if the leaseholders are:

• Having a difficult relationship with the current freeholder.

• Making large payments for service charge, ground rent, insurance and other charges associated with freehold.

• It can also be beneficial if your lease term is falling below 85 years as it will begin to decline in value from this point.

• All the leaseholders have the requisite funds to purchase the freehold. It may be worth having a valuation carried out to obtain a true to value estimate.

How much will this cost?

Freehold fees vary as do property prices, hence why we recommend obtaining a valuation.

When purchasing the freehold the leaseholders will have to factor:

• Freehold purchase price.

• A surveyor for both the freeholders and leaseholders.

• Legal fees for both the freeholders and leaseholders.

• Any Stamp Duty Land Tax or SDLT if the property is in excess of £125,000.

How do I finance this?

If you do not have the cash funds but still wish to do so, it may be worth considering remortgaging your property to help foot the bill.

Do we have a right to manage?

A  Right to Manage company is made up of fellow leaseholders who take the responsibility to manage the building collectively or mutually appoint an agent to do so on their behalf. Whilst management changes, there is no change to ownership.

As with purchasing the freehold, the requirements for a right to manage remain the same. Whilst this is the less expensive option. it will not add value to your property as is with purchasing the freeholder. The freeholder will still have ownership and therefore consent is still needed with matters such as lease extensions, alterations and lettings.

How do I do this?

Please review our Step by Step Guide to Purchasing the Freehold for more.

Contact our team for help.