Unfair service charges for leaseholders are rife. In England and Wales, there are powerful laws that give leaseholders rights. Leaseholders can force the freeholder to sell and buy the freehold in order to take over the management of the block of flats and have more control over their costs.
Is it worth buying my freehold?
It is now a lot easier for leaseholders to be able to buy their freehold and essentially be in control of their own costs.
It is a legal process known as collective enfranchisement. This gives leaseholders the right to get together and purchase the freehold for a fair market price. The government brought in the law in 1993. It was then updated by the Common hold and Leasehold Reform Act of 2002.
Are lease extensions cheaper?
It can cost a substantial amount of money for a lease extension. Often, mortgage companies and insurers will look at the length of lease especially if they are 80 years or less. Leaseholders will always pay a ground rent during the term unless they purchase the freehold. By buying the freehold they can usually extend the lease for a longer term, possibly up to 999 years for free. The only outlay would be legal costs.
It is important to realize how flats with a share of the freehold differ from a freehold house. Flat or property owners with a share of the freehold own their freehold jointly with other leaseholders in the building.
Freedom from the freeholder
There are often stories where freeholders charge hundreds of thousands for either work or lease extensions. Leaseholders can go to a Leasehold Valuation Tribunal to challenge unfair charges but it does cost a substantial amount of money. Once bought, the new freeholders are free to make their own choices to reduce costs. This will include contractors and freehold insurance policies. Leaseholders have so much more control when they own a share of the freehold.
Can owning a share of the freehold add value to a flat?
Yes, the gain could be substantial if there is a short lease. A short lease could also put buyers off as it is very difficult to get a mortgage on a property that has a lease less than 80 years. It is advised to ask a solicitor to look into the costs involved in doing so before committing to it. Also, see our Right to Manage article.
How much does buying the freehold cost?
The bulk of the cost will be the cost of negotiations and surveyors together with the actual value of the freehold itself. A property valuation will need to be done by a surveyor. There may then be a Tribunal if the landlord does not wish to sell. There could also be legal fees, valuation fees, stamp duty and freeholder fees. However, it could add a substantial amount to the value of the freehold property.
The benefits of buying the freehold can outweigh the initial costs involved. We would suggest seeking the advice of a solicitor before making any commitment. Once the exchange has completed, either buying the freehold or taking the right to manage. The flat block will need to be insured again. In that case, we can provide a quote and place on risk quickly and easily. Request a call back if you would like a quote.
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