Leasehold Property Owners – A Guide to acquiring your Freehold
If you have acquired a new build home from one of the major developers in the past decade, there’s a possibility that you’re in possession of a leasehold property. Traditionally, leaseholds were associated with flats and apartments featuring shared communal spaces and grounds that required maintenance. However, in recent years, large developers have chosen to sell houses as leaseholds, often retaining the freehold to generate income from ground rent or transferring it to a management company.
It’s worth noting that houses being leasehold is an exception rather than the norm. The issue caught the government’s attention back in 2017 when then-Secretary of State for Communities and Local Government, Sajid Javid, expressed his desire to end this “feudal practice.” This was due to concerns about unfair practices by landlords, including inflating ground rents and imposing unreasonable maintenance charges. This practice affects over half a million homes in England and, in some cases, has left property owners unable to sell or remortgage their homes.
So, what options do you have if you own a leasehold house? If you’ve owned the property for more than two years, you can purchase the freehold title from the landlord. If the freeholder is a commercial entity, like a private equity or investment firm, they may resist your request, as they originally acquired the freehold to secure a steady income from increasing ground rent and service charges. However, don’t be discouraged; the final decision can ultimately be subject to arbitration. Given the government’s stance on these leasehold properties, they would need a compelling reason to deny your request to buy the freehold.
Now, let’s explore the steps to buy the freehold title to your property:
- Engage a Property Lawyer: Begin by hiring a knowledgeable property lawyer who will contact the freeholder and inquire about their willingness to sell the freehold. If there’s no response, your lawyer will issue a “Tenants Notice” legally notifying the freeholder of your intent to buy the freehold.
- Freeholder’s Response: The freeholder has two months to respond, either by accepting your request or explaining their refusal.
- Valuation: Like any property transaction, you’ll need to hire a surveyor to determine the value of the freehold. Once you have the valuation, you and your legal team will negotiate a fair price for the freehold.
- Tribunal Resolution: If you cannot reach an agreement on the price, or if the freeholder refuses or doesn’t respond, your case may be referred to the First Tier Tribunal for a decision. However, in most cases, negotiations with the freeholder yield a satisfactory outcome without resorting to the tribunal.
Now, let’s explore the benefits of owning your freehold:
- Financial Relief: You will no longer be burdened by ground rent, which in some instances can double every ten years. Failure to pay ground rent can even lead to repossession under the lease terms.
- Freedom to Make Changes: You’ll no longer need the landlord’s permission to make alterations or improvements to your property, allowing for more flexibility and personalisation.
- Pet Ownership and More: Lease terms can sometimes be restrictive, prohibiting pet ownership, running a home-based business, or subletting. Owning your freehold eliminates these restrictions.
- Easier Resale and Remortgaging: Properties with fewer years left on the lease can be harder to sell or remortgage, potentially hindering your ability to benefit from rising property values.
Consider collaborating with your neighbours who also wish to purchase their freehold. Pooling resources and sharing legal costs with multiple homeowners can make the process more cost-effective.
If you’re contemplating acquiring your freehold, don’t hesitate to seek advice. Our experts are here to discuss your options, helping you make an informed decision about whether buying your freehold is the right choice for you. If you’ve been offered the opportunity to purchase your freehold, we can provide competitive fixed fees for the transaction.
