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Valuation for buying the freehold of a leasehold house in the UK

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    At some point in time, you must have considered buying the freehold of your property. The house was originally sold to you on a leasehold basis. If you buy your freehold you get more control of your property. You gain more freedom in deciding what you want to do with the property and, if alterations are in your mind, how much you want to spend on them. Sometimes when you’re a leaseholder of a property, the ground rent and service charges that you pay to your freeholder can get inflated to exorbitant proportions. You could end up paying unreasonably high ground rent to the freeholder.

    It is not only flats that have historically been sold as leasehold, some houses (new and old) have also been sold on a leasehold basis. Multiple limitations and unfair contract clauses with the freeholder can even impair you from being able to sell your property easily.

    Under such circumstances, it is perfectly justified to buy the freehold of your property. You would certainly enjoy the freedom.

    Check your eligibility

    The Leasehold Reform Act 1967 (the 1967 act) gives leaseholders the right to buy the freehold of the property. The process of valuation of buying the freehold of a leasehold house in the UK is also known as ‘Enfranchisement’ or ‘Freehold Enfranchisement’ where the leaseholders themselves become the freeholders of the property. However, there are a few requirements you need to meet for being eligible to buy the freehold of your leasehold house.

    Valuation for buying the freehold of a leasehold house

    Once you have checked your eligibility you need to calculate the price for buying the freehold of the property. Now, this price depends on several different factors and since the rules for calculating the price have changed through various amendments made to the 1967 act, it is quite complicated to calculate the price by yourself. It is recommended to get professional help from a surveyor to get a fair estimate of what you should be paying for the freehold.

    Methods of Valuation

    There are two different methods of valuing the house under the 1967 act known as ‘Original Valuation’ and ‘Special Valuation’ you can also use a freehold calculator for houses. Under relevant sections of the 1967 act, these are mentioned as

    Section 9 (1) – the house will be valued based on the original value of the site known as the Original Valuation basis

    Section 9 (1A), (1C) – the house will be valued on the Special Valuation Basis which includes a part of the marriage value.

    Which of the above two valuation methods is applicable on your property depends on the qualification criteria and you or the landlord have no say in it.

    The house will be valued on the Original Valuation basis if under Section 9 (1) of the 1967 act if the house meets the value limits and the lease qualifies the original low-rent test. Otherwise, in all other cases, the property will be valued according to the Special Valuation Basis, including cases where the lease has been extended under Section 14 of the 1967 act.

    To get a reasonable idea of the prices for buying the freehold of a leasehold you can also visit our freehold of a leasehold house calculator.

    After the Valuation

    When the valuation is carried out or after using a freehold calculator for a house, irrespective of the method used, the price for the freehold is valued as being sold in an open market to eliminate any biasing towards either party. The motive of the 1967 act is to maintain fair trade between the leaseholder and the freeholder and provide adequate compensation to the freeholder for the loss of their property. The act does not aim to help the freeholder drive a bargain in his favor. The property is valued according to the open market price to ensure the freehold is transferred at a fair price to the leaseholder. Using the Special Valuation method does drive up the cost of the freehold when compared to the Original Valuation basis, so it is better to work out the details beforehand.

    After the valuation, you may open up a dialogue with the current freeholder for negotiating the prices. If both parties settle on a price, the documentation may be completed. However, in cases where a settlement cannot be reached, the First-Tier Tribunal can be involved. The Tribunal acts as an unbiased third party and its role is not to rule in either the leaseholder or the freeholder’s favor. It makes an independent decision so the prices decided by the tribunal may not reflect what you or the freeholder may have decided.

    You as a leaseholder have to start the process by issuing a formal notice of claim to the freeholder. It is important to seek professional advice from a valuation surveyor with good knowledge of the market so you know what costs you are going to incur before you initiate the process.

    If you are looking for a lease extension in Slough, UK contact us for any kind of assistance. Our team of chartered surveyors can help you successfully negotiate your lease extensions or enfranchisement. Give us a call for a consultation today.

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    Call 01753 542984 for a FREE 10 minute consultation on your lease
    extension or freehold purchase.