How to buy your freehold

If you live in a leasehold property, someone else owns the land the building sits on.

But it's possible to buy the freehold and take control of your property and how it's run.

This is sometimes done through a process known as collective enfranchisement. This means all the leaseholders come together and purchase the property at a price that's fair and reasonable.

Alternatively, a leaseholder may buy the lease for the entire building - typically when there are only two flats involved. The owner of the other flat then becomes their leasehold tenant.

Apart from making it a lot easier and cheaper to extend the lease, buying the freehold can add value to your property. And who doesn't want that?

If you think you may want to sell in the future, owning the freehold can help attract buyers who may have been put off by a short lease, hopefully making it easier to sell when the opportunity arises.

What is collective enfranchisement?

Collective enfranchisement is the process by which you can buy the freehold of a property.

It enables leasehold tenants to group together and purchase the freehold at a fair price according to the Commonhold and Leasehold Reform Act 2002.

Former leaseholders who have bought out their freehold this way are described as owning a share of the freehold.

Ownership usually transfers with ownership of the flat and is why you sometimes see flats for sale described as having a share of freehold.

Eligibility for collective enfranchisement

To qualify for collective enfranchisement, the building must contain at least two flats, or if it's a block of flats at least two thirds of leaseholders must be eligible for the process.

You won't be deemed a qualifying tenant if you own more than one flat in the building, have a commercial or business lease, or the landlord is a charitable trust.

The building has to qualify for collective enfranchisement too. For example, National Trust properties and any buildings within a cathedral precinct will not qualify.

The process of buying your freehold

If the landlord wants to sell the freehold, they're legally required to offer it to the current leaseholders first.

They'll need to tell you the price of buying the freehold and then you can decide whether you're willing to purchase it.

Don’t rest on your laurels. If you miss the deadline, the landlord can put the flat on the market.

Before you start the formal process you'll have to make sure the other leaseholders in the building are thinking the same thing. You’ll need permission from at least 50% of flats before you can proceed.

Remember, the more flats that agree, the lower the legal costs will be for each of you, so it's in your best interest to get as many people on side as possible.

Conveyancing and surveys

Once you've established how many other leaseholders are involved, it could be a good idea to hire a solicitor who specialises in leasehold law and get them to draw up a participation agreement.

This should prevent people from backing out and causing a delay.

You'll also need to find a chartered surveyor who can give you the highest and lowest reasonable valuation for the freehold. First, make sure they're a specialist in collective enfranchisement.

Negotiating the freehold price

There are two ways to buy the freehold. It can be done informally by approaching the landlord and negotiating a deal, or you can issue a tenant's notice to the landlord detailing your offer.

The landlord will then have two months to accept or reject the offer. If they reject it, they must make a counter offer from which negotiations can begin.

If you're unable to reach a decision, the case will need to be resolved by the first-tier tribunal. This must be done within six months of the counter notice deadline or you'll have to apply again and start the process over.

Once you've successfully bought the freehold, you can ask the solicitor to extend everyone's leases, usually to 999 years.

Although everyone within the building will now be joint freeholders, you'll still need to have a lease drawn up to establish issues such as maintenance fees and the necessary buildings insurance.

Paying for collective enfranchisement

The money to pay for the freehold must come from one account, which is called the nominee purchaser.

This can either be one person or you can set up a limited company.

Note that you'll need to sort out who will be the director, how the decisions will be made and whether you need to protect yourself with insurance.

Remember that you'll also have to pay the legal fees of the freeholder during the process too.

Advantages of buying the freehold

There are a number of advantages to buying the freehold.

Increase in value

It's preferable to own a freehold over a leasehold, because it means you won't have to go through the hassle of extending the lease at any point. This should save you money in the long run.

Simple lease extensions

You won't have to pay for a lease extension and it can usually be extended quite easily to 999 years by the solicitor. Remember you can't escape paying the legal fees, though.

Service charges and ground rent

You won't be required to pay any more ground rent, leaving more money in your pocket each month.

If you weren't happy with how the building was being maintained, you and the other shared freeholders will be in control of who to hire to carry out maintenance in the building.

Finding cost-effective options could mean significant savings for each shared freeholder.

No more landlord rules

Technically, you'll be responsible for the building once you've bought the freehold, so rules and regulations that were imposed by the previous freeholder will be no more.

This could mean anything from being able to have pets to what colour the building is painted.

Disadvantages of buying a freehold

You need your neighbour's cooperation

If you live in a block of flats that's looking into collective enfranchisement, it really helps if you get along.

Together you'll be responsible for running the building, so you need to get on.

It's expensive

It can add value to your property in the long run, but it costs a lot to get freeholder status.

You'll need to evaluate the pros and cons of making this type of investment carefully before making a decision.

It's not a quick process

If you think it will be done in a matter of months, think again. It will likely take closer to a year to complete.

And the freeholder can make it difficult, costing you time and money.

Right to manage

If you want to take control over the running of the building your leasehold property occupies but not have freeholder status, it can be possible to apply for the 'right to manage'.

This will enable you to control service charges and get more involved in issues like which maintenance companies to hire. This can help reduce the fees you pay to maintain the building.

It's a lot quicker and cheaper than buying the freehold, taking around six months and only costing the legal fees.

The downside is having to take a role in managing your building, but not seeing any difference in the price of your property.

You'll still have to pay to extend your lease and may still have to apply to the freeholder for certain issues.

You also won't be waving farewell to the freeholder. They can still get involved with the right to manage board.

Any legal fees that the freeholder incurs from handing over the management process will also need to be paid by the right to manage board.