How to buy the freehold of your development?
What does freehold and leasehold mean?
'Freehold' is a technical term describing the ownership of a property, meaning that it belongs to the owner without the limitation of time and refers to the ownership of both the building and the land on which the building stands. 'Leasehold' property is ownership for a set number of years whilst leaseholders do not own the land or buildings they retain the right to use the buildings and use land for the term of the lease in return for ground rent.
Why should I be concerned about this now?
If there is less than 80 years left on your Lease Agreement, then whilst this sounds quite a long time there are a number of issues that occur when a lease is less than 80 years:
- Your property becomes less attractive to potential purchasers – one leaseholder has already had problems selling due to the short length of the lease
- Mortgage companies and solicitors become concerned with short leases
There are also a number of advantages to owning the freehold:
- Buildings insurance will be competitively sourced (i.e. cheaper) rather than relying on the freeholders using their preferred broker (expensive)
- A more attractive property than a leasehold flat for resale
- Ground rent will no longer be paid to the current Freeholder
Is there an alternative to purchasing the freehold?
Yes you can purchase a lease extension but in the long run a lease extension is expensive in comparison with purchasing the freehold and still you don't own the land and buildings! A lease extension could cost £10,000 per flat or more... you are at the mercy of your existing Freeholder as to how much they will charge.
OK, so how much will the freehold cost?
The value of a freehold can be a complicated thing to work out. It is sensible to obtain the opinion of a Chartered Surveyor. As the years pass the current value will increase, not solely due to external forces such as the housing market and local property prices but also the shortening lease and increases in ground rent charges.
What do we need to do now?
You would need to ascertain who is and isn't interested in purchasing the freehold within your development, as you will need the minimum of 50% of the members or Shareholders interested in purchasing the Freehold before consideration can be given to sell it to the members or Shareholders of the Management Company.