Buying the freehold of your property will give you lots of benefits. For example, you can control service charges, extend your lease (usually at no extra cost) and you won’t have to pay ground rent.
In his latest article, Jason Grimster, Leasehold Property Specialist, explores the options available to flat owners who wish to own the freehold of their building.
What is freehold on a property?
Ownership of your flat as a leaseholder can be a confusing and sometimes complex arrangement.
As a flat owner you may never have had to concern yourself with the difference between owning the freehold and leasehold title to your flat, let alone seek to purchase the freehold.
Put simply, the freehold owner of a block of flats (aka the freeholder) is the owner of the building and the land it sits on.
We’ve defined the freehold, and what it means to own a share of the freehold, in more detail in our dedicated article, which can be read here.
What is the leasehold?
Out of that freehold-ownership the freeholder (or a previous freeholder) will have sold off the individual flats on long leases, each for a period of years, often 99 years.
The right to live in the individual flat for 99 years will gradually reduce over time and the value of that right, known as a leasehold, will reduce.
The 80 year problem
When the lease on your property approaches or falls below 80 years, problems can arise that may encourage you to buy the freehold of your property.
Read about the issues of a ‘short lease’ here.
Another big factor that may incentivise you to buy the freehold is high ground rent. Read about ground rent issues here.
For the purposes of this article, we’ll assume that you are aware of the above issues and have already decided to buy your property’s freehold.
How do I purchase the freehold of my property?
Flat owners, (aka leaseholders), may have the right to purchase the freehold of the whole building. This may be done in one of two ways:
- By being offered the chance to purchase the freehold through a process known as the Right to First Refusal; or
- By forcing the sale of the freehold through Collective Enfranchisement.
Although both legal processes lead to the same outcome, (i.e. ownership of the freehold by the leaseholders), each of these processes are different, have their own benefits and will apply in different circumstances.
In the full article, Jason looks at the Right of First Refusal and Collective Enfranchisement in detail. Click here to read it.