Purchasing a Freehold Property
The terms ‘leasehold’ and ‘freehold’ often come up when purchasing a new property. In the UK, you can either buy property as leasehold or freehold. Buying a freehold gives you more control and absolute ownership of the property.
What is a freehold?
Buying a freehold means owning the property and the land it stands on. Unlike leasehold, you have permanent and complete ownership of the property for an indefinite time.
Anyone who owns a leasehold in England or Wales is entitled to buy the freehold if the landlord intends to sell the property. There are several benefits of owning a freehold including
- No payment of ground rent or other charges to the landlord
- Right to make alterations and repairs that you think best
- Potential increase in property value over time
- Control over property management
Purchasing a freehold property
The leaseholder can make an offer to the landlord to sell them the freehold at any time. By law, the landlord/freeholder intending to sell the property has to offer the leaseholders the first chance to buy it. Leaseholders have the right of first refusal.
The process of buying a freehold house and flat is different.
- Buying a freehold of a house – Leaseholders can make an offer or purchase a freehold as soon as they meet the eligibility criteria. Before purchasing a freehold, they must have owned the leasehold for at least two years.
- Buying a freehold of a flat – Buying a freehold of a flat is a little more complicated as it requires the leaseholder to get about 50% of the property’s tenants involved to qualify. At the end of the process, the leaseholder along with other occupiers would own the freehold of the building. Once they jointly own the freehold, flat owners can mutually agree on ground rents, other charges, and shop for the best insurance.
Eligibility Requirements for buying a freehold of a flat
The group of leaseholders has to meet the following criteria to buy the freehold
- The building has a minimum of two flats
- Only 25% of the freehold building is used for non-residential purposes
- At least two-thirds of the flats are occupied by leaseholders with long lease
- At least 50% of the total flats of the building are owned by leaseholders intending to buy the freehold
Cost of buying the freehold
Similar to property prices, the freehold prices also vary, however, the shorter the lease, the pricier the freehold. The leaseholder has to contribute to the following costs when buying a share of the freehold
- The purchase price
- The cost for a surveyor to do the property valuation
- Legal costs for leaseholders
- The legal and valuation fees for the freeholder
- Stamp duty land tax (if the purchase price exceeds $125000)
Seek legal advice when purchasing a freehold
It is suggested to seek legal assistance when buying a freehold of a flat or house with other leaseholders or alone.
An experienced solicitor can assist you to ascertain your eligibility, value the freehold, contact the freeholder, and negotiate the terms and pricing.
