Buying the freehold of your leasehold house
Recent stories in the press have focused on some of the problems associated with leasehold houses, and the government has now promised to ban the creation of any new ones except in limited circumstances. But what should you do if you already own a leasehold house?
One possibility is to buy the freehold. Here Jenny Heaton a residential conveyancing solicitor with Parnalls Solicitors, looks at the issue and answers some of your questions.
What is the problem with leasehold houses?
Generally, leaseholders have less control over their homes than freeholders and the ongoing costs of ownership are likely to be higher. As a leaseholder, you will have to pay ground rent and, usually, a service charge to your landlord. You probably need consent for certain events and will have to pay related professional costs.
In some properties with communal facilities, such as flats, shared ownership or retirement complexes, leasehold ownership makes sense. However, critics say there is often no justification for creating new leasehold houses, and some developers are motivated more by the continuing income stream from a lease than the interests of the homeowner. In some modern leases, the problem has been compounded by onerous ground rent provisions.
Not all leases are problematical though, and it is important to consider any on its individual merits.
Why buy the freehold?
Buying the freehold means that you will no longer have to pay ground rent or be subject to the other conditions imposed by your lease. Even if your lease does not contain any onerous provisions, this may still be a good option.
A lease is a depreciating asset. As the term shortens, the value of your property will decrease. At some point, this will make your home harder to sell and reduce your options for remortgaging. So, owning the freehold to your house is nearly always preferable to having a lease.
Can I make my landlord sell me the freehold?
The good news is that you may have the legal right to buy the freehold of your house even if your landlord does not agree. The rules for establishing if you are eligible are complicated, and your solicitor will be able to explain them to you more fully. Basically though:
- your property must be a house;
- your lease must be for a term of more than 21 years; and
- you must have owned the house for the preceding two years.
If you are buying a leasehold house from a previous owner, it may be possible for your seller to give the landlord the appropriate notice and to transfer the benefit to you. Then you would not have to wait for two years to start the process, and the price you pay to your landlord may be lower as a result.
How much will it cost to buy my freehold?
The cost of buying your freehold depends upon many factors, but there are two distinct elements; the premium and professional fees.
The premium is the price you must pay to the landlord to buy out his interest. The basis for determining this is set out in legislation. It reflects the market value of the freehold and the loss of ground rent to the landlord. If your lease has 80 years or more to run, the premium may also include an element of marriage value. This is the additional value of the freehold to you compared to other potential buyers. Its inclusion will generally result in a higher premium being payable, especially as the term of your lease decreases. So, it may make sense to buy your freehold sooner rather than later.
Professional fees include your legal and valuation costs, and some of your landlord’s costs, for which you will also be liable. If the freehold costs more than £125,000, you will have to factor in the cost of stamp duty land tax too.
It is important to choose a solicitor and a valuer who are both experienced in leasehold enfranchisement and who can work well together. The provisions are complicated and there are many pitfalls for the unwary. For example, the legislation provides a strict timetable you and your landlord must observe. If you miss a deadline your claim may be deemed withdrawn and fail.
We will be able to give you a realistic indication of the likely costs at the outset, which will help you decide whether buying the freehold is right for you.
For further information about buying your freehold, or buying or selling a property in general, please contact Jenny Heaton in the Residential Property team on 01566 772375 or email firstname.lastname@example.org
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Been Asked to Sign an Employment Settlement Agreement? Seek Advice Urgently...
Services Update: Continuity of Legal Service Provision
Advising You in Uncertain Times
Could carelessness on social media land you in court?
Is an electronic signature on a commercial property document acceptable?
What happens when there is no health & care LPA in place
Social Media Training for Businesses
Information to gather for your probate solicitor
Gazundering, what it is and how to avoid it
Relief from forfeiture – what happens if the tenant forgets to pay the rent?
Not so safe at work - compensation for an accident at work
New organ donation law: giving you control
Running a business from home
Have nude photos of you or your teenager been posted online?
Landowners’ rights and the Electronic Communications Code
Building in your back garden
Christmas is a time for giving (and inheritance planning)
Buying the freehold of your leasehold house
Redeveloping an empty pub for commercial use
Why it takes time to obtain the Grant of Probate
Social Media: The unconscious privacy threat
Is your reputation being threatened?
Making a will after your spouse or partner has died
Interns celebrate completion of internship at solicitors
Selling your home in a flat market, some top tips
Claiming compensation for a serious road traffic accident
New Media and Communications Court list reflects surge in internet defamation claims by Laura Baglow
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
The risks of DIY probate
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Making a will when you retire
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Five problems with a leasehold property
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Valuing an estate for probate
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Have you had an accident involving a horse?
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.