Freehold purchase of a leasehold house is much less common than a group of leaseholders coming together to buy the freehold of their block of flats (in a process called collective or freehold enfranchisement).
Freehold purchase or enfranchisement of a house in this way is much less common for one simple reason – there are relatively few leasehold houses. Individual flats are always sold on a leasehold basis and the vast majority of houses are freehold.
LEASEHOLD HOUSE ENFRANCHISEMENT UPDATE 27 June 2019
In a press release from the Communities Secretary on 27 June 2019, the Government announced that in the future, “all new-build houses will be sold as freehold”. However no indication of the likely date of this change was given.
NB the latest change, which confirms earlier government indications, will not change the law with regard to houses that are currently owned on a leasehold basis. If you own one of these properties, as the leaseholder you will continue to need to make an application to buy the freehold using the process of leasehold enfranchisement
How our specialists can help you buy the freehold of your house
Most solicitors rarely deal with lease extensions and often struggle with the complex timetable and regulations involved. Even fewer deal with enfranchisements – especially the freehold purchase of a house. We do all of these regularly.
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Leasehold Houses – More Common Than You Might Think
However, although estimates vary, the United Kingdom is believed to contain approximately 5m leasehold homes. Unsurprisingly almost all of them are flats – but you might be surprised to learn that approximately around 670,000 of them are actually houses.
More recently, certain national developers have started to increase the number of houses they build as leasehold, quite unnecessarily in our view. As a result, we regularly act clients in buying the freehold of leasehold houses built by the likes of Persimmon, Redrow and Taylor Wimpey Homes.
And leasehold houses are particularly common in the North West – a full 27% of houses sold in the region in 2018 were leasehold.
Many of those were sold with leases of 99 or 125 years [though some were lucky to be granted a 99 year lease]. And while Britons seem quite happy to buy leasehold flats – they’re much more reluctant to buy leasehold houses.
The Right to Buy the Freehold of Your House
If you live in England or Wales and are the owner of a house on a leasehold basis, then you could be entitled to buy the freehold of your home – if either your landlord decides to sell the freehold, or if you meet the criteria needed to start the freehold purchase process yourself.
Buying a house’s freehold can be more complex, and very few solicitors [even those few with plenty of lease extension and freehold purchase experience] have much experience of the process. However rest assured that our team has all the expertise needed to deal with this sort of case.
5 Great Reasons to Buy the Freehold of Your Leasehold House
There are many benefits to owning the freehold of your house.
- No more rent payments: If you have to pay ground rent to your landlord, then that stops when you buy the freehold.
- It increases the value of your house; Owning the freehold increases the value of your home
- It makes your house much easier to sell; Most buyers have little understanding of leasehold houses and almost always prefer to buy a freehold house. In fact the vast majority of purchasers simply won’t even consider buying a leasehold house.
- Management and maintenance control: being the freeholder gives you much more flexibility and control over when you do repairs and maintenance on your house. It also means that as there is no freeholder, you don’t have a service charge to pay, or get their permission when you are thinking about doing home improvements.
- Security: This is a benefit which should not be underestimated. Leaseholders never completely own their property, even if the mortgage has been paid off years ago. This could mean that there is always a chance of eviction. Buying the freehold gives you peace of mind in the knowledge that your property is entirely yours, and you will not face eviction unless you don’t pay the mortgage.
How Do You Define A House Anyway?
It may sound a ridiculously obvious question, but in legal terms at least, it’s not.
The definition of “house” encompasses many different types of buildings. As far as enfranchisement is concerned, a “house” can be lots of things, such as a shop with a flat over, a block of flats, offices and flats, a pub with a flat or a normal house.
Rights to buying freehold of houses have been around since the 1967 Leasehold Reform Act but there are still legal cases brought regularly as to whether a building constitutes a house. One of the important legal points to think about is that a house must not have an over or under-hang with another building, and if it does, it is probably a flat and not a house.
Am I Eligible to Buy the Freehold of My House?
In order to make a claim to buy the freehold, you have to have been the legal owner of the house’s lease for at least two years.
You still qualify even if you don’t live there yourself and rent out the house to tenants – as long as your lease covers the entire house.
If the house is a split tenancy (such as a company renting a shop and someone else the flat upstairs), the tenant must have lived in the property for at least two years out of the previous 10.
If the tenant is deceased, then their representatives now have limited rights to purchase the freehold.
Does My Lease Qualify?
That’s an easy one – the lease must simply have been originally granted for a term of at least 21 years – which is often referred to as “long leasehold”.
Buying the Freehold of Your Leasehold House – Initial Steps
Buying the freehold of a property is more straightforward to organise than collective enfranchisement of a block of flats – simply because you are in control of the process and don’t have to on the ongoing involvement in the process of other leaseholders.
The first thing you have to do is instruct a solicitor who has plenty of experience buying the freeholds of houses. Beware – very few have enough experience. Choose carefully, as even solicitors who do a lot of work with lease extensions and enfranchisements might have scant experience when it comes to buying the freehold of a house.
You also need to find a surveyor who has expertise in producing a valuation of the premium required for the freehold purchase a house. Don’t worry – as part of our one-stop shop, we can help you appoint the right surveyor
After you have established that you do indeed have the legal right to buy your freehold, the first step is to issue a formal notification to the freeholder that you intend to follow that path. This is called the “initial notice” and is a formal legal document served on the freeholder. We can so that on your behalf.
Throughout the enfranchisement process, there is a strict timetable which has to be stuck to – and again beware – if deadlines are missed you have to start all over again from the beginning of the legal process. After the initial notice is served, the freeholder is given two months to respond to your notice with a counter notice.
Then, negotiations about the price and terms of the purchase can start. Your solicitor and your surveyor can help with this.
Valuation of the Premium
Like collective enfranchisement and lease extension, your freeholder will need to be compensated for the loss of their freehold interest. This compensation is paid in the form ought is referred to as a “premium”.
When you come to buy the freehold of your house it’s really important that you get the right valuation. You will normally find your freeholder will have appointed an expert surveyor – so know exactly what he should be charging – but if you don’t that information, you are very vulnerable to being charged over the odds to buy the freehold.
When it comes to valuing the premium, don’t rely on any old surveyor – you really do need someone who knows exactly what they doing in this specialist field.
The 80 Year Rule – Watch Out
Just like lease extension and enfranchisement, the premium payable for the freehold purchase of your house may involve what’s known as “marriage value “. The most important thing you need to know is that the day your lease drops below 80 years, you’re going to need to pay more – probably thousands of pounds. So if at all possible, make sure you buy the freehold of your house for that lease drops below 80 years– or you’ll end up paying more to buy the freehold.
Click here to read more about marriage value.
How Long Will It Take to Buy the Freehold of My House?
The length of time it takes to buy the freehold of a leasehold house is partly affected by legislation – the process, for example, gives your freeholder two months to reply to your initial notice. However the speed of the entire process is dictated by how cooperative your freeholder is.
However, in general terms, assume it will probably take between 6 and 12 months from the date of your initial notice.
A Dispute with the Freeholder over the Price?
As with the freehold purchase of a flat, if you and your freeholder simply can’t agree on the right premium to be paid, or you disagree on the level of your freeholder’s reasonable legal and valuation costs, then the matter can be resolved by the First-Tier Property Tribunal (previously known as the Leasehold Valuation Tribunal or LVT).
It’s not just about the size of the premium – watch out for details of the lease
Increasingly we find that when acting for owners of houses recently by the likes of Persimmon, Redrow and Taylor Wimpey Homes, they offer the freehold to those homeowners who bought their property to years ago.
And we have found that amongst the terms of the deal offered by these developers, are some rather nasty clauses – in respect of which we’ve managed to negotiate a better deal for many of those purchasing the freehold of houses from these developers.
Want To Buy Your Freehold? Call Us Nows
Here at Bonallack and Bishop, we are expert Leasehold Enfranchisement and Lease Extension Solicitors and can advise you wherever you live – provided your property is in England and Wales. Our solicitors do not even need to see you! We regularly run cases for clients nationwide, using phone email and Skype video only.
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