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.
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.