While the decision to buy a leasehold property can be made for many reasons – particularly price and availability – it can be the case that a few years down the line, it makes sense to revisit the situation and look into converting your lease into a freehold. There are several ways to do this, and the process depends on whether your property is a house or a flat, but the outcome can be a home that increases in value and that you have more control over.
So, how do you buy the freehold of a flat, and how much will it cost?
Buying the freehold of a flat
When buying the freehold of a flat, at least 50% of the total number of flats within the building must want to buy the freehold - a process known as collective enfranchisement. You can’t purchase the freehold alone.
The freeholder must sell the freehold if several other qualifying criteria are met, namely that:
- it must be a self-contained block of at least two flats
- it must have no more than 25% non-residential use
- and two-thirds of the flats are held by qualifying tenants who own a flat that had a lease term of more than 21 years when it was sold
As it will involve a larger group of people, buying the freehold of a flat can be a complicated process, and you’ll need to work closely with your fellow tenants to find out if they want to start the process and to ensure it is seen through to the end.
To find out more about how to buy the freehold of flats with other tenants, read our blog.
Should I just extend my lease?
If buying the freehold seems too complicated or expensive, there is the option to extend the lease instead, so long as you’ve owned the property for two years. For flats, this can simply be a case of approaching the freeholder and enquiring about extensions, but be wary of doing this without professional advice as it may be used as a way to increase your ground rent.
The more formal approach is similar to buying the freehold. You’ll need to value the lease and serve notice on the freeholder with your formal offer. This can only be rejected if the notice is invalid, if not it will either be accepted, or negotiations will begin. Once again, if you can’t reach an agreement, you can apply to a First-Tier Tribunal to have the matter settled. The extension price will depend on several factors, including the flat’s value, the lease length and the ground rent, and the skill and knowledge of your surveyor.
The lease extension process can be slow and confusing, so it’s important to opt for professional advice and thorough valuations to give you the best chance of a swift and successful outcome.
What is marriage value?
Whether looking to buy the freehold of a flat, a term that is likely to come up is ‘marriage value’. While not widely known, it can have a major impact on how much you end up paying for the freehold or lease extension.
Marriage value refers to the increase in the property’s worth following a lease extension or freehold purchase. So, for example, if the freeholder grants a lease extension, the leaseholder will potentially profit from this, so it’s deemed that this should be shared 50:50 between both parties. The same would be the case when buying the freehold.
Crucially, however, if the lease is longer than 80 years, marriage value won’t apply, so if you’re considering extending the lease or buying the freehold, try to do so before you reach this milestone.
The Novello Approach
Getting an accurate valuation alongside clear, relevant advice is essential when you’re looking to buy the freehold or extend your lease, and Novello promises to deliver both. Our lease extension valuation reports will give you an accurate insight into the costs associated with a lease extension, including the best and worst-case scenarios for both parties. As well as looking at the market value of your property, we’ll also call on our years of experience and previous decisions from tribunals to give you a thorough picture of the situation.
Similarly, our freehold valuation service is carried out by RICS-registered valuers who will determine the fair market price for your freehold and liaise with all parties involved in the process to keep things moving and speed up complex procedures.
Customer service is key to the Novello team, and we understand that this can be a long, confusing and stressful process. That’s why we’ll always be on hand to answer queries, share insight, and help resolve issues in a timely and thorough manner to ensure you overcome any obstacles you may face.