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Purchasing your home's freehold is easier than you think

City Resi blog

Leasehold property owners often find themselves in dispute with their freeholders, over everything from where the cheapest insurance has been obtained to the quality of the management. One way to overcome these quibbles is to buy the freehold and take control, and doing so is easier than you might think.

Leasehold house owners can compulsory purchase the freehold of their property under the Leasehold Reform Act 1967, providing:

      • The property is divided vertically from any adjoining property
      • Generally the tenancy must exceed 21 years
      • The leaseholder has owned the property for at least two years

Leasehold flat owners can compulsory purchase their freehold collectively under the Leasehold Reform, Housing and Urban Development Act 1993 providing:

      • The property that the flat is part of consists of at least two flats and at least 75% of the building is in residential use
      • At least half the flats owners in the building agree to buy the freehold. Where there are only two flats, both must participate.
      • At least two thirds of the flats are let to qualifying tenants - with a few exceptions, this is anyone whose tenancy exceeds 21 years. For example, in a block of 10 flats, 7 must be qualifying tenants and at least five of these must participate. 

 8 steps to purchasing your freehold

1. Take legal advice to ascertain that you are eligible to compulsory purchase your freehold. 

2. Obtain a valuation of the freehold. The Leasehold Advisory Service's website lists solicitors and valuers who can advise you. It's best to seek expert help as a claim can be held to be invalid if it's thought that figures were 'plucked out of the air'. As an example, a modern block of flats with more than 80 years unexpired on all leases and annual ground rents of £150 per flat can expect to pay between 15 and 25 times the combined ground rents. 

3. Be prepared to pay the landlord's reasonable costs, probably valuation fees of £100-£200 per flat plus VAT for a small block in suburban London and say £500-£750 per house plus VAT in a similar location and the conveyancing fees from £300 plus VAT. Ask for these to be confirmed in advance. 

4. In the case of a group of flats, a management company needs to be set up to purchase the freehold on behalf of the group. 

5. Serve the initial notice of intent to purchase. The freeholder has to respond in the time frame set by the notice. If the freeholder fails to respond the lessees can apply to the Leasehold Valuation Tribunal for a Vesting Order, which will allow the purchase on the terms of the initial notice. 

6. Begin negotiating, or if a dispute arises, proceed to the First Tier (Property Chamber) Tribunal (FTT). 

7. Agree a premium or have the FTT make a decision an then put in the hands of solicitors for completion of the deeds. 

8. Make sure the front person of the management company is capable of organising everyone together - this is often the trickiest part! 

This process can appear daunting, but if you prepare and arm yourself with an expert valuation and legal advice, the purchase of your freehold can provide you with peace of mind and greatly increase the value of your property.