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Buying Freehold – how it works
Buying the freehold interest for your property is a statutory action under the Leasehold Reform Housing and Urban Development Act 1993 ("the 1993 Act") (for collective claims and lease extensions).
What is Collective Enfranchisement
This is where a group of tenants who own flats in the same building collectively buy the freehold interest from the landlord. Provided that certain conditions are met then, under the 1993 Act, the leaseholders can force the freehold to sell the freehold to them.
There are numerous reasons for wanting to buy a freehold interest. Most commonly a tenant wants to get rid of their landlord and wishes to manage their own property. Furthermore, if a tenant purchases the freehold interest they can grant themselves a lease for 999 years with no ground rent payable.
For a group of tenants to bring a collective enfranchisement claim, the following conditions must be satisfied:
There must be at least 2 flats in the building; and
At least 2/3rds of those flats are let to 'qualifying leaseholders' (these are leaseholders whose lease was originally granted for 21 years or more; nad
At least 50% of the leaseholders in the building want to participate in the enfranchisement; and
A building will be excluded from these rights if there is more than 25% of the internal floor area (excluding communal areas) devoted to commercial uses.
Unlike a stautory lease extension, there is no requirement for the tenants to have owned their flat for at least two years.
Often when tenants collectively enfranchise they will set up a company to own the property as the 'nominee purchaser'. All participating leaseholders then become a meber of the company, and a director if they wish. We recommend setting up a company where there are three or more leaseholders involved in this process.
Exercising your freehold right to buy becomes more expensive the fewer the years left on the leases of the flats in the building. To work out how much longer is remaining on your lease, check the dates of your Lease carefully. For example, if the lease commenced in 1978 and it is 99 years long, then it will expire in 2077, therefore in 2012 it will have approximately 65 years remaining, and in 2013 it will have approximately 64 years remaining, and so on.
If you were to extend your lease, you should be doing so before the lease has less than 80 years remaining to avoid paying a ‘marriage value’ premium. If your lease has less than 80 years left to run then you should either extend it sooner rather than later, or if other leaseholders in the building are looking
to their lease in the future then you may be able to join together and buy the freehold, and this may be more cost effective for you.
To proceed with buying the freehold you should instruct an experienced freehold purchase solicitor as soon as possible. Your solicitor will assist you with instructing a suitably qualified valuer/surveyor to calculate the price of the freehold. You solicitor will serve the required claim notice on the landlord informing him/her of your offer and intention to buy the freehold. It is important that you instruct a solicitor to prepare this notice as there are strict requirements regarding the content of the notice and, if these requirements are not met you may potentially ruin your chances of acquiring the freehold at this time, or you may have a costly and lengthy legal battle to determine the validity of the notice. The freeholder will then have two months in which to serve a Counter Notice either admitting your right to acquire the freehold, or denying your right. Your freeholder may only deny your right for a stautory reason, not just because he/she wants to keep the freehold.
Freehold enfranchisement can be quite complex and disagreements between tenants often arise. It is crucial therefore that you seek professional legal advice before embarking upon a freehold purchase in this manner. Along with serving the notice with intention to purchase, your solicitor will draft any necessary agreements between the tenants to facilitate a successful nominee purchaser.
How long will my Buying My Freehold take?
If your landlord is offering to sell the freehold then it can be completed in as few as three months. However freehold enfranchisement, whereby you have to force your landlord to sell the freehold to you, takes longer, as your landlord will probably want to enter a period of price negotiation. If you still can't agree a price, then you may have to apply to the courts or Leasehold Valuation Tribunal which can extend the time to one-year or upwards – thankfully this remains unusual.
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Buying Your Freehold - UK solicitors who specialise in Buying Freehold Property
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