Buying the freehold to your property
You can ask the landlord/freeholder to sell you the freehold at any time. By law, they must offer all leaseholders first refusal to buy the freehold if they wish to sell it.
Buying the freehold to your flat isn’t something you can do on your own though, to qualify you have to get your neighbours involved too. By law, at least half of the leaseholders in the building must come together to purchase the freehold.
At the end of the process, you and the other occupiers would together own the freehold to the building. This is often done by forming a limited company that would be owned and controlled by the flat owners. Separately each occupier would still have a long lease but from the new entity that owns the freehold, which you and your neighbours control.
Once you jointly own the freehold, you can collectively set ground rents, shop around for the best insurance and generally be in control of your own destiny. You are also able to extend your lease so it is a long lease with the only cost now being legal fees.
Can I buy the freehold to my flat?
Generally, the eligibility requirements for a group of leaseholders to buy the freehold are as follows:
- the building needs to contain at least two flats
- no more than 25 per cent of the freehold building can be used for non-residential purposes, e.g. shops or offices
- at least two-thirds of the flats must be owned by leaseholders who own long leases
- at least half of the total number of flats in the building must be owned by leaseholders who want to buy a share of the freehold
In summary, you do not need to have all occupiers on board but you do need to have at least half of the flat-owners involved. If there are only two flats in the building, then both leaseholders must want to buy the freehold.
How much does it cost to buy the freehold?
Freehold prices vary in the same way property prices do but certainly the shorter your lease, the pricier your freehold. To buy your share of the freehold you will need to pay your flat’s share of:
- the purchase price for the freehold
- the cost for a surveyor to do an accurate freehold valuation (so you avoid paying over the odds)
- legal fees for the leaseholders
- the freeholders legal and valuation fees
- Stamp duty land tax (if the purchase price is over £125,000)
Benefits of owning the freehold to your flat:
- Free lease extensions: you can usually extend the lease to 999 years at no extra cost (excluding legal fees)
- You control service charges: you can choose value for money, quality providers
- No ground rent: you normally don't pay ground rent
- Fewer conditions: leases can come with a number of terms, e.g. you may normally need permission to sublet or have a pet
- It can add value to your home: buyers generally prefer freehold flats to leasehold
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