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

Valuation for buying the freehold of a leasehold house has become not so very tedious process. At some point in time, you must have considered buying the freehold of your property. One which most probably has been sold to you on a leasehold basis. Because why not? If you buy your freehold of the house or flat you’re living in you get more control of your property. You gain more freedom in deciding how much you want to spend on service charges and what company you should employ for taking care of the maintenance of your property. 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 and your fellow residents in your building may also end up paying unreasonably high ground rent determined by the freeholder.

Apart from flats, some new houses may also be subject to these issues when bought on a leasehold basis. How about not being able to control the costs for maintaining the common areas that, despite being open to all, are actually controlled by the freeholder? 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 your freehold of your property. You would certainly enjoy the freedom of realistic ground rent, more control over your communal areas and the ability to modify or extend your house.

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 ‘Collective 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. For example, the building must contain at least two flats and at least two-thirds of the flats must be owned by qualifying tenants.

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 solicitor and 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 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.

(Marriage value is the rise in the market value that the property gains after the completion of the Lease Extension. Generally, the combination of the value of the physical property and the appreciation of the value experienced due to the lease extension can increase the overall value of the property significantly higher than if these were considered separately and then added together.)

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 the 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 freehold calculator for house, irrespective of the method used, the price for the freehold is valued considering the property is 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 favour. 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 leaseholder for negotiating the prices. If both the parties settle on a price, the documentation may be carried out. 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 favour. 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 leaseholder. 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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