Many leaseholders want to take control and be in charge of their own destiny.
A Lease is the right to live in a property for a fixed term of years. The ultimate owner of the property is the freeholder or landlord – once the lease runs out, in theory, ownership will go back to the landlord. Most leases are for a set term – 99 or 125 years and the landlord is usually paid a small rent known as a ground rent every year for the length of the lease.
The shorter the lease on your property, the less valuable your property will become. It will also be more difficult to sell the property or for you to re-mortgage.
In the past, lease length was less of a problem, but today because of tighter mortgage lending requirements and a more careful approach from legal advisors any lease of less than 80 years is considered to be a short one. Freehold purchase is one solution.
Many leaseholders are unhappy with the way their buildings are managed. Recent legislation means that there is now an option for leaseholders to take over the management of their building without buying the freehold. For many people however they still want the ultimate control that comes with the purchase of their freehold.
There are two main ways in which you can purchase your freehold. They are what we call the ‘formal’ and ‘informal’ routes.
The ‘formal’ process
In order to make things fairer for the owners of leasehold property (leaseholders) – previous Governments have created legislation which in most cases, gives the leaseholders the right to come together to purchase the freehold from their landlord.
In order to have the right to purchase their freehold, leaseholders must fit certain criteria, these include – the original lease must have been for a term considered ‘long’ – (more than 21 years). Meeting the criteria allows leaseholders to become what is known as ‘qualifying tenants.’
In any building a majority of qualifying tenants must agree to the purchase if it is to proceed.
The legislation gives those qualifying and forming a majority the right to formally serve notice on the landlord informing them that they wish to purchase the freehold of the building.
As the landlord is being ‘forced’ to sell the freehold and will lose out on any future ground rent income, it is only fair that they are paid some money in compensation. This is called the Premium. There is a set formula to calculate this premium but there are many different factors that go into the calculation and so there is never one final figure, the premium will sit within a calculated range. This is why you need professional advice from experts.
The formal process involves the serving of legal notices and set timescales and procedures. It is legally based and involves co-ordination between your solicitor and your surveyor. Ultimately if you qualify, the freeholder has to agree to sell the freehold and usually the only thing to be agreed is the premium. As there is a strict timescale, if after a set time the negotiations have not been concluded, either party can apply to have all matters that have not been agreed, decided by the First Tier Tribunal.
The ‘informal’ freehold purchase process
Increasingly with freehold purchases, especially with smaller blocks or houses converted into a small number of flats, the freehold purchase can be agreed outside the confines of the relevant Acts.
This more informal approach involves open discussions with the landlord to try and agree a premium for the purchase. Although the procedure is mainly outside the relevant legislation, there are still some rights remaining. For instance if a Landlord wishes to sell the freehold on the open market, under most circumstances the leaseholders have the first right of refusal. They must be given the option of purchasing before the freehold before it is sold to other parties. Also, the freeholder cannot sell the freehold to one of the leaseholders and exclude the others from the transaction. (This is just a brief guide and you must take specialised legal advice in this matter).
As with lease extensions, if the leaseholders make an approach to the landlord, the landlord is under no obligation to agree to the sale (unless it was already on the market), but if the terms and the premium are reasonable, then agreement is often made.
This process often begins with the leaseholders getting together and contacting the landlord and asking how much it would cost to purchase the freehold. In other instances the landlord has contacted the leaseholders to say that they want to sell and they want the leaseholders to make them an offer.
The landlord may have quoted a premium – but how do the leaseholders know that the figures are reasonable? Sometimes the freeholder doesn’t want to deal directly with the leaseholders and getting them to quote a premium may be difficult.
So how we can help you?
✅ Whichever process you follow – Marsden Chartered Surveyors are there to advise you every step of the way.
✅ With easy to understand advice and clear guidance, we can steer you through the complicated world freehold purchases.
Our two part service
We offer a two part service which has been created to give you the advice you need when you need it and to keep your costs to a minimum.
The first stage is an inspection and valuation. We will inspect each property and provide a valuation report outlining your options and the likely costs involved. We will give you figures based on both an informal and formal approach.
As the premium figure is dependent on many different factors, for each option, we will provide a range of likely premiums and from within that range we will suggest a premium which we believe to be both reasonable and justified. We will give all the leaseholders guidance on what both the combined premium and their personal individual premium will be.
Once we have sent you the report, we will then be available to give further help and guidance. If at this stage you opt for an ‘informal’ process and you feel you are able to negotiate directly with your freeholder, we will support you and help you along the way. This service is included in the single fee for the valuation. If you decide that the formal approach is more suited to you, we will work with your solicitor to advise them on the correct premium to quote in the initial notice.
Whichever route you take, for an additional fee, we can negotiate your freehold purchase for you.
If you have served a ‘formal’ notice, then you will usually need a surveyor to negotiate with the freeholder’s surveyor. If you are not comfortable negotiating directly with the freeholder in an ‘informal’ process, we can also do it for you. Again, this second stage will be for a fixed fee and this will cover all negotiations up until an agreement is made.
If the matter has to be referred to the First Tier Tribunal, we will charge an extra hourly fee for all additional work involved, including attending the tribunal if required and acting as an Expert Witness.
If you need legal advice, we can put you in touch with expert firms of lawyers who we have worked successfully many times on the past.
Purchasing your freehold can be a complicated and difficult process. Let Marsden Chartered Surveyors make it easier for you.
For more advice give us a call or use our Contact Us page. We will be in touch as soon as possible to discuss your specific requirements.
