How to extend the lease of a flat?

Anyone who owns a leasehold property should bear in mind that the lease should be extended before the length of the lease starts shrinking too low. The length of the lease and the cost to be incurred in extending the lease, are inversely interconnected and so as the lease term reduces the cost to extend it increases. We are going to explain certain steps to be followed to extend the lease of a flat.

How do I get a new lease granted for my flat?

As each year passes on your lease, the value of your flat/property diminishes. Therefore, it is recommended to extend the lease as soon as possible because once the lease length falls below 80 years, you need to pay an additional amount for its extension. Mortgaging or remortgaging also becomes difficult when less than 75  years are left on a lease and it may become the reason for your inability to sell the flat. All such factors also decrease the value of the flat.

How can I extend the lease of my flat?

The residential lease extension process is rather complicated and thus, it is recommended to consult an expert who could guide you in the right direction and bring in the best possible results. Otherwise, a small glitch can become very costly in terms of money as well as time.

Apart from consulting an expert, the next thing you should do is serve a Section 42 notice to the landlord and any other intermediate landlord, including your offer for the premium. In return, the landlord will respond with Section 45 notice that includes the counter offer. Eventually, both parties agree on a price to extend the lease. If either of the parties does not agree on the terms and conditions, they can apply to the First-tier Tribunal to decide on the premium amount.

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Can the landlord refuse to grant the extension?

Provided that the leaseholder and the property qualify and a valid notice has been served under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993, then the freeholder is obliged to extend the lease.

The landlord must serve his response within a couple of months from the date the section 42 notice was served by the leaseholder, or else the leaseholder is able to apply to the First tier Tribunal to extend the lease for the price stated in the notice.

Qualification for a lease extension

Before executing the procedure and all other formalities, one must qualify for the lease extension. Here are some of those requirements for the qualification:

  • Own an existing long lease which was originally issued for a term of at least 21 years
  • Owned a flat for a minimum of two years

How long can I extend the lease of my flat?

The lease can be extended by 90 years made under the Leasehold Reform, Housing and Urban Development Act 1993. Alternatively, the leaseholder and freeholder can mutually agree without the need to serve any legal notices. However, under this scenario the freeholder has a stronger bargaining power.

What is the best time to extend the lease?

The lease should be extended ideally with more than 80 years remaining. That means the length of the lease should be a minimum of 80 years.Otherwise, the cost of the lease extension increases rapidly.

How much I have to pay to extend the lease?

The cost to extend the lease depends on multiple internal as well as external factors, including the property size, type, the number of years left on the lease, freehold value of the property, and the annual ground rent; therefore, it is very hard to define a particular amount.

Calculating the cost for the lease extension is considered a complex process, and it is therefore recommended to go for professional valuation services by an expert who complies with the requirements of the Leasehold Reform Legislation.

The Lease Extension Guide, Costs and Procedure

If you already own a leasehold property or planning to buy one, then this leasehold extension guide is for you. It is very crucial for you to gain adequate information about the lease extension process and your legal rights in order to make the informed decisions for the property and save a thousand pounds.

Let’s discuss what is a lease extension?

A lease extension is simply a process to add some years to your existing lease of your leasehold property. A Leasehold property is not owned outright. It is owned by the freeholder but your lease gives you the right to own it for a fixed period of years (the term of your lease). Once your lease expires the property reverts back to the freeholder and you no longer have any rights to the property.

Once the original lease has been agreed the leaseholder is liable to pay annual ground rent that is set out in the lease document.

Now let’s discuss what is a lease?

A lease is an agreement between you (leaseholder) and your landlord (freeholder). The lease can be for any number of years but is usually between 21 and 999 years long. The lease contract includes rules, regulations, rights as well as obligations of the leaseholder as well as the freeholder.

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Does the length of lease affect the property’s value?

Yes, the duration of the lease affects the property’s value. The primary reason behind this is the number of years left before lease expiration. The lower the number of years , the lower will be the value of the property and the sooner the property will revert back to the freeholder. However, you as a leaseholder have the right to extend the lease, but when the lease is near to its expiration, getting it extended becomes very costly. Furthermore, The lower the number of years the harder it can get to get a mortgage from a bank.

When is the perfect time to extend your lease?

There is no perfect time to extend the lease, however, the lower the length of the lease, the more expensive it will be to extend. Therefore, you should take appropriate steps to extend it sooner rather than later. But there is a point where leasehold renewal becomes really significant and that is at 80 years. The moment your lease  falls below 80 years, the cost of the lease extension will start increasing. This is because at this point the leaseholder has to pay an extra amount known as marriage value on top of the lease extension premium.

How to calculate the cost to be incurred on lease extension?

The process to lease extension  is defined under Scheduled 13, Part II of the Leasehold Reform, Housing and Urban Development Act, 1993. The premium amount is payable to compensate the landlord against the reduction in the value of the interest in the property as he will have to wait longer to regain control of his property In order to determine the cost of a leasehold extension, the following factors need to be considered, however, these are not limited to the following:

  • Current market value of the property
  • Number of years left in the lease extension
  • Ground rent payable
  • Value of the property after the lease is being extended

The best way to extend your lease is to get a Chartered Surveyor to value the premium for you. Although, there will be a fee payable, you will get the best advice and the adequate guidance to extend the lease at minimum cost and without any complications. At LeaseHold Valuations, we Provide professional service and walk you through the process in order to make this process less painful and to get you a better deal.

What is Leasehold Property and why does it Matter?

Most of the people are aware of the terms like renting a property and owning the property, but very few know what a leasehold property is, how to go through the lease extension valuation process, etc. Under  leasehold ownership, you lease (rent) property for a long period, often for 90 or 120 years or even 999 years, unlike rent agreements which are mainly for a year or two.

  • A leaseholder has a contract with the freeholder that sets down the legal rights of either side.
  • The freeholder is mainly responsible for maintaining the common parts like – hallways, corridors, walls, roof, staircase, gardens etc.
  • Leaseholders are responsible for paying an annual maintenance or service charge along with their share of the building insurance.
  • Leaseholders are liable to pay rent of the leased property on a monthly or yearly basis to the freeholder.
  • leaseholders are required to obtain permission from the property owner for any major alterations to their property.
  • In any case, if leaseholders fail to pay the amount stated in the contract, the lease can be forfeited.

Although a lease is for a very long time it will reduce over time and therefore, there will come a time when the lease length will need to be extended. leasehold property valuation, the extension of leasehold property, So, what is the benefit of extending your lease?

Let’s discuss in detail whether a leasehold property is a right fit for you or not:

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How does a leasehold property operate?

With a leasehold agreement, the property owner, who is also known as the freeholder, grants  permission to the leaseholder to live in the particular property for a particular time period. During this time (known as “Term”) the leaseholder is required to pay the freeholder a rent (known as “ground rent”) usually on a quarterly, six monthly or annual basis. The advantage of owning a leasehold property as opposed to renting one (on as Assured shorthold basis) is that the leaseholder  can improvise or modify the property according to their needs because the lease is for a long span of time.

Leaseholders can even sometimes renovate or build a whole new building on the land and rent separate units. At the end of the lease, the property must be returned to the freeholder

Benefits of a Leasehold Property

  • There are a few noteworthy benefits for the potential owner with regards to the leasehold properties such as leasehold properties are less expensive compared to the purchase of the freehold.
  • Furthermore, the leaseholder can sell the same lease to a third person even without taking permission from the property owner.

How do I know whether my property is leasehold or not?

If you are unsure that your property is leasehold or not, you should ask your solicitor or directly ask the property owner. Previously, leaseholds used to be aligned with flats, however, now newly built houses, as well as the buildings are sold as leaseholds too. In England, almost 4.2 million homes are registered as leasehold apartments and most of them are newly constructed city apartments. However, the UK government has intervened followed by banning the ‘unjustified use of leasehold in new-houses’.

What happens when the lease ends?

The moment your lease period will end, the property owner will again own the property, regardless of the amount you have paid during the lease period or you have paid the mortgage amount in full. That means that even if you were living in that property for a very long period, let’s say for 80 years,  you will not  have anything to show at the end of the lease.

How can I extend the leasehold period?

There is legislation which protects the leaseholders’ interest. Providing the original lease was for a minimum of 21 years then you can extend it for 90 years more. Moreover, if you live in a house and it is a leasehold property then, you have the right to extend the lease for 50 years, while following certain conditions.

At LeaseholdValuations, we can help through this minefield to extend your lease.

 Don’t struggle and talk to our experts now!

A complete guide to choose an expert to evaluate the value of your leasehold extension

Leasehold extension is a bit of a lengthy and complicated process that includes cost estimation and getting the right expert to take care of every single step engaged in the lease extension process while avoiding every possible pitfall. Therefore, if you are also considering extending the lease, then probably the first question that comes in your mind is ‘How much it will cost?’ Unfortunately, it is not at all possible to estimate the exact cost to be incurred in extending the lease at the beginning of the process. Hence, let’s discuss this in brief:

Who can apply for a lease extension?

To apply for lease extensions, homeowners must:

  • Own a lease, which was originally granted for  at least of 21 years in length ; and
  • Have owned the property for a minimum of 2 years;

There are a few exceptions such as commercial or business leases as well as the properties which are a part of a charitable housing trust.

How to calculate the value of leasehold extension?

The cost of a leasehold extension depends on  multiple factors such as the value of the property, the annual ground rent, the number of years left on the lease and the ground rents payable during the term of the lease Therefore, it is necessary for you to contact an expert to calculate the value of the residential lease extension.

How to choose an expert and why you should consult one for leasehold extension?

The legal procedure around the leasehold extension is complicated and thus, requires an adequate understanding of the laws and regulations surrounding leasehold enfranchisement to manage the process successfully. As this area of law is a minefield, you will require an expert who can assist you at every single step along the way  

The residential leasehold extension surveyor will help you produce a valuation report, which will calculate the premium payable for a lease extension. Every leasehold extension has numerous debatable variables and only an expert with the experience in leasehold law can be able to handle such debates and negotiate on your behalf. Now the question arises, how to choose an expert who could help you calculate the value of the leasehold extension? The answer to this question is:

  • You should choose an expert who has sufficient knowledge of leasehold law and other related  rules and regulations
  • Check whether the specialist you are going to hire is competent to estimate the local property values or not
  • Check the expert’s previous experience including  the following:
    • Is the expert a member of the Royal Institution of Chartered Surveyors (RICS)?
    • Does the expert have a clear fee structure or not? (does he charge on hourly basis or project basis)
    • Does the expert have enough knowledge about the geographical location of the property?
    • Does the expert have an online presence and has an active website?
    • Does the expert clearly and effectively communicate with you?
    • Is the expert ready to provide evidence before a Tribunal?
    • How many times the expert has appeared at a Tribunal?
    • Does the expert mainly act for freeholders or leaseholders?

The role of chartered surveyor for the lease extension

The above mentioned points already describe the significance of professional advice and consultation in the lease extension process. Let’s throw light on the role of chartered surveyor for lease extension:

An expert should be able to:

  • Evaluate the value of the leasehold extension in line with schedule 13
  • Help you know how much to offer landlord in the tenant’s notice
  • Help you know how to respond to the landlord’s counter notice
  • Negotiate on your behalf with the landlord

Therefore, it would be strongly advisable  for you to appoint an expert to extend your lease because a valuation surveyor should  have good knowledge of the leasehold law and local property market. Moreover, we have come up with a chronology of steps to execute to make the leasehold extension process easy and effective:

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Step 1: Appoint a chartered surveyor for lease extension who is a member of the RICS

Step 2: Ask your solicitor to serve a formal notice on your landlord based upon the valuation received by your surveyor  

Step 3: Once the counter notice is received from your landlord ask your surveyor to negotiate the premium payable.

Step 4: Once the premium has been agreed, ask your solicitor to complete the new lease.

At Leasehold valuations, our specialists handle a large number of lease extension cases in the UK every year. Hence, we are familiar with such cases and can help you make the most of your hard-earned money while making the lease extension process transparent and hassle-free.

What is the difference between lease renewal and lease extension?

Most people, who are at the end of their lease term, encounter two words that seem to mean the same – extension or renewal? Many people, including judges and some professionals, confound this term as a lease extension with a lease renewal. Almost all leaseholders have the right to extend the lease term beyond the end of the initial term. In this article, we will describe whether there is a difference in these options

In very basic layman’s language lease renewal is a new lease but with the majority of the terms remaining the same. There may be some changes though, for example, to modify the lease terms. Lease extension is used to mean that you are extending the term of your lease (perhaps by the statutory 90 years or some other length) with the main terms of the lease remaining intact. However, even in lease extension you can alter some terms. So in essence, lease renewal and lease extension are the same thing (as far as leasehold valuations are concerned) but some people use the two phrases interchangeably.

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A lease extension still requires a completely new lease to be drawn up although in most cases the only thing that is changing is the end date of the lease.

The parties need to sign a brand-new lease from a legal perspective in order to renew a lease. A lease extension extends the term, which usually includes the terms of the existing lease.

If you’re left with around 83 years on the lease-end period we would certainly suggest that you look for more professional and legal advice. As with an expert solicitor, you will get help to decide what you should do to renew or extend your lease.

Leasehold valuation tribunal – Things you should know about LVT

What is the Leasehold valuation tribunal Or LVT? 

The Leasehold Valuation Tribunal (LVT) has been renamed First-tier Tribunal (Property Chamber) (FTT) and is a statutory court in England that determines different types of landlord and tenant conflicts involving residential property. The FTT usually consists of a panel of three; one with a background in property law (usually a solicitor); one with a background in property valuation, generally a qualified surveyor; and a layman, although some decisions of the FTT are decided by a single member. The FTTs are indeed non-departmental public organizations. 

What is covered by the FTT’s jurisdiction? 

The FTT has wide-ranging jurisdiction over all aspects of a residential property including service charge determination, variation to long leases, the premium payable for a lease extension or freehold purchase and appointments of managers for buildings that are not managed properly. The FTT has the power to provide landlords with dispensations from compliance with the law. A few examples are: 

  • Deciding the price be paid by leaseholders compulsorily acquiring either the freehold of houses or lease extensions of property or collectively exercising the right to buy the freehold of a collection of flats.
  • Evaluating how much service charge is payable.
  • Granting landlords exemptions from compliance with statutory consultation on service charges. 
  • Assessing the appropriate level of fees charged by landlord’s for lease extensions
  • The appointment of managers and receivers for flats improperly managed

How does the FTT differ from the County Court process? 

The FTT is a more informal and less adversarial arena. The FTT provides a more open platform to discuss the dispute among the parties and has limited authority to grant costs. 

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How to apply to a First-tier Tribunal (Property Chamber)? 

You can collect a form from your local First-tier Tribunal (Property Chamber) office or the leasehold advisory services website. Before submitting a request, make sure you have taken all the previous steps and are ready to submit the final application. For example, if you want to appoint a manager for the property or building, you usually have to give the freeholder a certain notice before submitting the application. Other sources of assistance are the Leasehold Consultancy Service, a solicitor, a citizen’s advice office or other advice centres in your area can help you with the procedure and guide you through the application. 

How do First-tier Tribunal (Property Chamber) work? 

First-tier Tribunals are formed by a panel composed of three members: a solicitor, a valuer and a non-expert. It is independent and unbiased. It is a kind of judicial hearing, but less formal than a court. It is important to get professional help and their perspective before you proceed as the proceedings can get quite complicated and the formalities that need to be adhered to are quite confusing at times. 

The leaseholder or the freeholder can take their problems to the First-tier Tribunal. The First-tier Tribunal offices are not the only place to hold hearings. They can be held near your address and are often open to the public in offices of the local council. You should go to a hearing in the first place, before planning to apply to a First-tier Tribunal to resolve a dispute. Your regional First-tier Tribunal office can tell you when and where the next hearing regarding your issue will take place. 

How long does the FTT process take? 

This depends on the amount of supporting documents, the nature of the final application and the availability of the Tribunal. As an example, it usually takes four to six months from start to finish for a simple application for a determination of the reasonableness of service charge. 

What happens at a First-tier Tribunal hearing? 

You need to gather the evidence before the hearing. Based on the information provided by you and the Freeholder, the First-tier Tribunal will take all submissions into account and make a decision. Both parties will have the opportunity to present their side of the story. The First-tier Tribunal mostly asks questions, and you will have the opportunity to ask your side of questions to the freeholder and any witnesses. You may need to wait a few weeks after the hearing before a written decision comes through the post.  Many First-tier Tribunals have waiting lists. 

What if you don’t agree with the Leasehold Valuation Tribunal’s decision? 

You may appeal when you think that the decision of the First-tier Tribunal is incorrect. This is normally only possible when the First-tier Tribunal has acted inappropriately or has not followed the correct procedure. You cannot apply simply because you don’t accept the decision. 

How much does a Leasehold Valuation Tribunal cost? 

Application cost ranges from £ 300 to £ 500. If you win, the First-tier Tribunal may be decide to award all costs to one side but this is rare. If more than one leaseholder is affected by the problem, you can apply and share the costs.

Why Leases Are For a Set Number of Years?

Freehold Property” and “Leasehold Property” are the two common terms of real estate that you must have encountered while buying any property. The basic meaning of this term, or how the former refers to this Freehold term, is properties that are “free of hold” by any third party or entity. Leasehold properties are leased for a certain period, e.g 99, 125 or even 999 years from the time of construction. 

But, why is there an unusual number of years? Why 99 years? Or, What happens to the property at the end of the lease? Who receives ownership after the lease is over? Or what are renewal conditions applicable in all these situations?  

Someone who buys a leasehold residential or commercial property will own the property only for a set period of years, after which the property is returned to the landowner. The buyer of the leasehold property is expected to pay fixed ground rents to the landowner. Under certain circumstances the lease can be extended after the lease period is over.   

What happens upon the expiry of the lease? 

The property is returned to the freeholder or the next entity up the chain of ownership (e.g headlessee). 

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The XX-year lease concept 

The lease begins with the date the property is handed over to the leasehold purchaser. The lease is based on an agreement contained within a document.  The developer is then allowed to build and sell residential or business premises. These properties will be owned by the buyers only for XX years (e.g 99, 125, 999) and after the end of lease duration the landowner can claim back ownership. In addition, the landowners get ground rent in accordance with the lease agreement every year for the duration of the lease. 

The lease contract contains both the lessor’s and lessee’s rights and obligations in respect of property occupancy, in exchange for a specified rental charge. The terms and conditions are all contained in the Agreement, such as the nature of rights, leasing periods, leasing rights, conditional clauses, the termination clause, etc., All these are essential for sustaining any lease and dealing with any dispute concerning the lease in future. 

The purpose of setting a fixed term time is to control both the use and the transfer of land. This period was viewed in earlier days as a safe interval, as it covers the leaseholder’s lifespan. It was also considered as a reasonable length of time to protect the owner’s ownership. 

Some facts about leasehold property 

  • The length of a lease can be extended by paying a premium to the freeholder.
  • Developers tend to favour developing flats on a leasehold land because the expense of these plots is cheaper than freehold properties.
  • Banks do not like to finance the purchase of a leasehold property, particularly if the remaining lease period is under 70 years. As the lease approaches the end of the lease period the value of such properties also falls. 

Buying an old leasehold property 

Leasehold properties are always more affordable than freehold property and may be purchased as an investment. 

The shorter the remaining time of the lease the cheaper the property is to purchase compared to similar properties with longer lease lengths remaining. However, a payment (premium) must be paid to the freeholder in order to extend the leas and this amount varies widely depending upon location, type of property, how many years remaining and ground rents payable. 

For properties with less than 70 years remaining it is very difficult to get mortgages from banks and so it is usually necessary to extend the lease before you can get a mortgage. 

If you are selling a short lease property you will most likely only be able to attract cash buyers for this reason and so you will be forced to sell it for less.

Why there are two types of ownership in the UK – leasehold and freehold?

You are likely to encounter the terms ‘leasehold’ and ‘freehold‘ when you buy property in the UK. These are the two main types of ownership of property which are followed in the UK. This terminology can be the difference between a home worth buying and one that isn’t.  

This very confusing and legal technical term basically means how you own the property. If you own the property and land it stands on free from any involvement of the third party then you are Freeholder of that property or house. And if you have any kind of agreement with the owner of the property to use that house for a certain period of time with terms and conditions and ground rental charge then you are the Leaseholder of that property and you have rented that property from the Freeholder. 

When you are in search of any property, you really want to know what type of ownership you are buying but many estate agents tend to gloss over this ownership fact and sometimes refrain from telling the buyer what type of building they are selling until much later in the process. And even across the internet, there is no clear information about what ownership type the property falls under.  

Leasehold instead of freehold in the UK 

It would be unfair to say that all or most of the property, house, buildings, or flats are held on leasehold instead of freehold. Across all over the UK, there are different systems for managing the property and it can vary from area to area and also depends on what type of property it is. If you find a stand-alone house in the UK to buy you are most likely to find it under Freehold.  The majority of houses in the UK are freehold although there are still many on leasehold. Almost all flats in the UK are held on leasehold ownership (although a block of leaseholders may collectively own the freehold of their block). 

Flats are usually leasehold because there must be some way to own the ‘shared’ land underneath the flats, but it is common for flat owners to own a freehold share when buying the flat. If you are buying a flat that’s what you want! You would like to become a shareholder in a ‘holding’ company owning the underlying land and organizing maintenance when you buy the flat.

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Why Leasehold? 

The reason why most land is held on the leasehold is from history. For centuries the Crown, Church or Duke of Westminster or other major landowners owned the underlying land. Instead of selling the land outright, they sold long leases to people who wanted to build: building owners had a lease on the land they could sell along with the property, and there was usually a ‘ground rent’ going back to the leaseholder. 

Keeping the history aside, the reason for these strange arrangements (and we’re talking about England here) is that the history of land ownership has indeed been uninterrupted for a very long time. It actually goes back to the Norman Conquest and the sharing of various Lords from Baronial lands. Since then, legal precedent and land ownership have evolved in confusing, unusual ways. 

Some leases are long and often run for 200 to 999 years, causing relatively little issue. Ground rents are often very small, sometimes because of centuries-old contracts that did not even permit for inflationary increases! But on the other hand, if a lease is running for a long time or the ground rent is high, it can make a property fall in value and be difficult to sell. 

As time passes, the Freeholder of land increases the ground rents and many charges on new lease agreements. As a result, since WWII successive governments have given leaseholders more rights over free-holders (people that own the foundational land).  Even rights like owning the leasehold property from freehold. 

For example, if 50% of qualifying leaseholders in a qualifying block of flats  agree, then they can force the freeholder to sell them the freehold so it can be held in common by the owners of the flats. They have the legal right to purchase it. However, they obviously have to compensate the freeholder for taking his property. 

Why does the Leasehold system still exist? 

The leasehold system exists because there are situations where it would not be possible for everybody to own the freehold of their property. For example, every flat owner in a block could not own the freehold of their particular flat as isolation to the other fellow leaseholders. A flat owner on the second floor of a block of flats cannot own the land under his flat – that would be somebody else’s flat. In addition flats have common areas be it just a staircase or also a car park and gardens. How would these areas be maintained? 

Therefore, a leasehold system is crucial in maintaining a healthy property market. 

It has become common for developers in the last 10-20 years to try to retain an interest in a house by selling it on leasehold. By increasing the “ground rent” in line with traditional inflation, they try to cash in on rising property prices, every 5 or 10 years. This is a scam.

Step by step guide to buying a freehold

Buying a property or buying your own house cafreen be an overwhelming or exciting feeling, but buying a dream house can be an intensely stressful experience as well.  If you’ve bought a flat the chances are you’ve been sold a leasehold property. 

The UK leasehold-freehold structure is now entrenched in our housing market. Traditionally all stand-alone buildings are freehold, while most apartments and flats are leasehold. There is a very minor streamline difference between these two and buying the exact property that you were looking for can be hard. Yet, many property owners do not take time to learn the comprehensive knowledge of this perplexing system. And with all this confusion you may wonder if you can buy your property’s freehold and how you can go about buying the freehold. 

Should you buy the freehold property? 

The basic question arising before any purchase is that should you buy the freehold of your property? Most people or apartment owners are always happy to purchase property on leasehold terms. However, in certain situations, you may decide that you want your own property. Reasons could be anything from the fact that you want more control over your block and, in a particular case, where you are spending money. Or you are just tired of your freeholder’s unfair ground rent rises in the contract and have to pay excessive rates for the building services. In this stated situation, it is not unusual for leaseholders to try to purchase the property’s freehold so they can leave stress behind. 

 Here are a few reasons for buying your freehold. 

Reduce long-term costs – The freeholders of the property have control over service charge rates and the total cost of management. You will also find that your flat’s insurance can be decreased. 

No restrictions – Often, leasehold contracts come with a whole series of terms and conditions to be adhered to by the leaseholder, from allowing pets and many more but  once you will have freehold property all the restrictions can be lifted. 

Increasing the flat ‘s value – When your lease period drops below 80 years, it can be more costly to extend the lease and purchase the freehold. However buying the Freehold is worth doing, to maintain or increase your flat ‘s value. 

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What type of property should you look for? 

If you go for a flat it will be sold either as a leasehold or share of the freehold. There is no practical reason for houses to be sold on a lease basis. Our advice would be to purchase the freehold as soon as you are eligible. 

Buying the freehold of your block of flats will require the involvement of most of the other leaseholders in the block. You will not be able to purchase the freehold of the whole block by yourself. You’ll still have to contribute towards service charges of the building but you’ll be able to have more control over how much the charges are. It is worth noting that if you have a flat and you own a freehold share, you still have a lease. Nevertheless, you should be able to extend it for free without any cost and it will be from a new entity owning the freehold. 

Purchasing the freehold can be very difficult, therefore many people simply extend the lease and carry on with their freeholders. To help you through the process, we’ve pulled together questions and legal guidance articles that will guide you through the key points of purchasing your property and help you to make the right decisions. Here is a step by step guide to buy Freehold property. 

Buying the freehold of Flats or apartments 

Buying a flat and apartment includes several steps and you may need help from others in terms of support and legal advice. 

Check you’re eligible 

There are a number of requirements that you will need to meet in order to be able to purchase your freehold. The most simple rule or requirement is that for more than two years you must have been an owner of a leasehold apartment. Then the other sets of criteria can vary from place to place. 

Speak to your neighbours 

Your next step should always include some of your fellow residents and convincing them to buy along with you. As to purchasing the freehold, at least two thirds of the leaseholders must be “qualifying leaseholders”. At least half of the building’s leaseholders need to participate in the purchase. Convincing them can be relatively easy to do if you and other building residents are all currently paying extortionate ground rents or your freeholder always seems to be choosing the most expensive choice when it comes to building services. 

Find out the cost of the freehold 

You need to figure out how much this is going to cost you. It’s hard to give an estimate as the price of the freeholds varies as much as the price of the house. You’ll need to get detailed market valuation from a surveyor. The one thing you should always keep in mind is that the shorter your lease or short duration lease, the more expensive the freehold will be. 

Get a solicitor 

It is important to take expert advice before buying any property. Not every solicitor will have expertise in Freehold purchases so it is important to find one that specializes in this area. Take advice from a chartered surveyor who specialises in leasehold enfranchisement who can give you a clear understanding of the size, the distribution among the residences, the problems and whether or not the building is suitable. 

Sign a participation agreement 

Next you should draw up an agreement on the participation of every apartment involved. The last thing you want is for someone to drop out at the last moment, raising the cost for everyone else or even falling below the amount of 50 percent who are ready for the purchase. An agreement for participation is basically a contract for all leaseholders involved in the acquisition and outlines all matters among participants – including items such as the conditions for lease extensions once the freehold is acquired. 

Set up a limited company 

The collective purchase of a freehold includes additional responsibility including establishing a limited company. It includes the filing of accounts, the selection of a nominee buyer, a group communications manager and elected supervisors. If you want to become a director, consider taking out directors’ insurance to protect yourself from liabilities.   Your lawyer will help you with everything above. 

Seal the deal 

The solicitor or Valuer can sometimes informally approach your freeholder with an offer if they agree, which can also immediately reduce your legal costs. If that doesn’t work, you’ll have to officially issue a notice that every leaseholder must sign – this is binding. 

The freeholder then has to serve a counter notice within two months. Negotiations then take place between your surveyor and the freeholder’s surveyor, to try to reach an amicable agreement as to price. If agreement cannot be reached on a suggested price then you can take your case to the First-Tier Tribunal, which is the arbiter of such disputes and will decide the price which both leaseholder and freeholder have to agree to. 

Buying the freehold of your house 

In general, buying a freehold house is more simple than buying for a flat because you can act alone and you don’t have to convince someone else. You will need to hire a qualified leasehold solicitor and obtain a professional valuation to make a bid via the solicitor to the Freeholder of that property. 

If you can’t agree on a figure or the discussions hit a dead-end then you can take it to the First-Tier Tribunal just as with the agreements of flats freehold. The First Tier Tribunal will decide the final price.

Leasehold vs Freehold – What’s the difference?

You are more likely to encounter the terms ‘leasehold’ and ‘freehold’ when you buy your first house or any property. These are the two main types of ownership and before buying a house, you should understand the difference! Here we will look at every way you can legally own your home along with its advantages and disadvantages of freehold buying or taking it on lease.  We’ll guide you through some of the more technical elements and try to explain which will suit you best according to your needs. 

In the UK, this is two separate forms of homeownership that exist – freehold and leasehold. Each of these is vastly different from each other and it’s important to know what needs to be applied to a property that you’re thinking of buying or renting. Because if you make a misinformed decision, it can result in problems in the future. 

What are the different forms of property ownership? 

The two types of legal ownership are fundamentally different: freehold and leasehold. While estate agents tend to gloss over this ownership fact and mostly ignore telling the buyer what type of building they sell. This terminology is the difference between a home worth buying and one that isn’t worth buying. Many people who don’t find out or understand this while buying a home end up regretting it – getting it wrong can be mostly hugely expensive. 

This very confusing and legal technical term basically means –  

Freehold: Someone who owns the freehold of the property owns the property and the land on which it stands. 

Leasehold: On the other hand, a leaseholder, do not own the property or land on which the property is built. A leaseholder basically rents property from a freeholder for an assigned number of years, decades, or centuries. 

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What is freehold? 

If you own a property freehold, it means that you own the property itself, plus the land on which it stands, forever. You are named as the freeholder in the land registry, owning the ‘ title absolute.’ This ensures that you will be responsible for repairing and maintaining your home – with no third party having any say in what you are doing. Traditionally, most houses used to be sold as freeholds. Given the choice, freehold is pretty much always the best option to go for while buying any property. 

The majority of houses are normally sold freehold. However, there are still a large number of houses that are sold as leaseholds. This issue has recently been well publicised and highlighted in the press and is particularly pronounced with new apartments or new houses, so check before you purchase. 

Benefits of having a freehold 

  • You don’t have to worry about the lease running out, as you own the property.
  • You won’t have to pay annual rents, ground rent, services charges or any other landlord charges.
  • No third party has a say on any work undertaken in your property.

Disadvantages of having a freehold 

  • You are responsible for maintaining everything.

What is Leasehold? 

If you own a leasehold property, you do not own the land on which the property is constructed, or the building itself. Instead, you have a lease from the freeholder who owns that property for a period of months or years, just to use the property. Leases generally start with either a 99 but can go up to 999 years. 

With a leasehold, you own the property for the duration of the lease agreement with the freeholder (specific to the terms and conditions of the leasehold). When the lease ends, the property returns to the freeholder, unless you are able to extend the lease. Most flats are owned by leasehold, so while you own your property in the building, you have no stake in the building in which it is located. 

Homebuyers normally buy a ‘lease’ type of agreement from the freeholder for a house or land. The lease can be of any length, it is common for 90 or 120 years but it can be as long as 999 years and short as 40 years. 

In general, the shorter the lease remaining, the less valuable a property is. This means that the remortgage or sale of your property can be difficult once your lease end date is less than 70 years. Almost all the flats in the UK are leasehold, but houses can also be leasehold. A leaseholder has a contract with the freehold owner that sets out both sides’ legal rights and responsibilities.  

Disadvantage of Leasehold 

  • Leaseholders are liable to pay maintenance fees, annual service charge and building insurance costs.
  • Leaseholders have to pay an annual “ground rent” to the freeholder the amount which is decided in agreement.
  • Leaseholders will always have to seek permission for any major works done to or in the property.
  • The freeholder can keep restrictions, such as not owning pets or subletting on leaseholders and they have to follow that.
  • If the leaseholder does not comply with the requirements of the lease, for example in the case by not paying the fees, the lease could be forfeited.

Advantage of leasehold 

  • By signing a leasehold agreement, the tenant negates the need to buy the land. By eliminating the costs of land acquisition, you can drastically reduce its overall and upfront cost.
  • Normally, the freeholder would be responsible for maintaining the building’s common parts, such as the entrance hall and staircase, as well as the exterior walls and roof. Which helps to reduce the stress of maintaining a building to the leaseholder.

For which should you go for? 

In most cases, the Freehold appears to be the safest and preferred option when it comes to buying your own home.  However, this can be expensive. You must do your research before purchasing any property and always check the documents. Depending upon your budget, it may be worthwhile going for a leasehold property as this will work out cheaper and you could also buy in a better location for less than a freehold. 

No matter whether you choose Freehold or Leasehold property, we will always suggest you take proper professional advice so you won’t end up stuck in a bad property situation.

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