In the UK, if you live in a leasehold flat you have a legal right to buy your freehold.
But if you’re a flat owner, you can’t simply buy the freehold for your flat. This is because the freehold relates to the building.
Instead you have to team up with your neighbours to buy the freehold for your whole block.
Once you and your neighbours have bought the whole freehold, you will individually own a share of the freehold.
Your share gives you a say on how to run the building. But you’ll have to agree on this with your neighbours.
You will still have your lease – but this isn’t bad!
You’ll have a share of the building’s freehold, but you’ll still own the lease for your specific flat as well.
This is because you still need a way to show which bit of the block you individually own.
Usually the lease becomes a bit of a formality. As soon as you and your neighbours own the freehold you can increase the length of all your leases to 999 years and reduce the ground rent to £0.
Advantages and disadvantages of buying your freehold
For many owning the freehold is very appealing, but particularly if you live in a block of flats, it could be simpler and more cost-effective to look at lease extension. This article looks at the pros and cons of both options and will help you decide what is best for you.
Buying your freehold is a big change from being a leaseholder. You own your property outright, forever and have the final say on everything about its management.
There are some big benefits.
Buying your freehold. The pros:
- you’ll add the most value to your property: freehold homes are usually worth more than leasehold
- you’ll be able to extend your lease to 999 years (flats)
- you won’t have to pay any more ground rent
- you’ll be able to decide what gets spent on maintenance and insurance
- you’ll be able to remove any conditions around home improvement or pet ownership that were lurking in your lease
Compelling stuff! There are however, one or two downsides.
Buying your freehold. The cons:
- if you live in a block of flats you’ll need to organise to buy your freehold together with your neighbours. You only need to get half of them on board, but it can be a delicate and time-consuming process to co-ordinate everybody.
- the diplomacy continues once you’ve bought your freehold. Responsibility for the maintenance of the building will now be shared amongst you and your neighbours. Even though you will be the freeholders, you’ll still need to manage your leases and your building so you might have to form a company together.
- buying a freehold is marginally more expensive than extending a lease because your freeholder will have lost their entire stake in your property. You might also find the legal costs are a bit higher to reflect the new lease and management arrangements you’ll need to put in place.
- sometimes even after you’ve bought your freehold, you still have to pay “estate management charges”. This is usually only applied to houses on new build estates.
Advantages and disadvantages of extending your lease
Extending your lease means you won’t change the fundamental arrangement that you are a long-term tenant in your property. That said, by formally extending your lease you will see some big improvements to your situation.
(Check out our article on the difference between formally and informally extending your lease)
Lease extension. The pros:
- extending your lease will increase the value of your property
- formally extending your lease adds 90 years to your lease. You won’t have to worry about this again!
- your ground rent will be reduced to zero
- you can act alone. No working with neighbours to buy your freehold or manage your block
- it is marginally cheaper to extend your lease than buy your freehold
Lease extension. The cons:
- your home is still a leasehold property
- you’ll still have to pay any management charges, permission charges and insurance charges outlined in your original lease
- you’ll still have to stick to any of the restrictive rules in your lease
Either way, extending your lease or buying your freehold puts you in a much stronger position than living in a property with a dwindling lease. Talk to us about how our lease extension specialists can help you.