Block of Flats Buying the Freehold.jpg

While the leaseholder of a house has the right to buy the freehold on their own, it is a different story if you live in a block of flats. After all, why should you be able to buy the freehold for the entire building without your neighbours having a say?

Luckily, there is an equivalent for flat leaseholders known as ‘leasehold enfranchisement’. This involves at least half of the leaseholders in a block buying the freehold together, then managing it as a group. As you would expect, the results of such an endeavour will depend on you and your neighbours getting along, having enough money and investing enough time in the planning process.

Things will go much more smoothly if you get professional help from a local conveyancer. In addition to helping you navigate the legalese of freehold enfranchisement, they will be able to advise you and your neighbours on approaching and dealing with your freeholder.
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Leasehold enfranchisement

The leaseholders in a block of flats have the joint-right to extend their leases or buy the freehold for their building. This is known as ‘leasehold enfranchisement’. In a shared residence, it would be unfair (not to mention extremely expensive) for one person to buy the freehold on their own. Indeed, to purchase the freehold for a block of flats you will need to have at least half of your neighbours onboard.

This course usually involves creating a limited company which will be jointly owned and controlled by the new freeholders. The freeholder group will need to ensure that the communal areas of the building are properly maintained and decide on the length of leases, as well as the size of ground rents, insurance policies and so on.

The process can be quite complicated with several qualifying factors involved:

  • The block must must contain at least two flats
  • No more than 25% of the freehold building can be used for non-residential purposes
  • At least ⅔ of the flats must be owned by leaseholders who own long leases
  • At least half of the total flats in the building must be owned by leaseholders who want to buy a share of the freehold. In a block with only two flats, both leaseholders must be involved

Start by booking a conveyancer to give you a good idea of the costs. There are a number of online freehold value calculators, but they are not particularly reliable. You will also need to consider the legal fees. If necessary, you can also speak with a mortgage broker about remortgaging your flats to pay the costs.

In order to buy the freehold for your block of flats, you must pay your share of:

  • Purchase price for freehold (premium)
  • Cost of freehold valuation
  • Leaseholder legal fees
  • Legal and valuation fees for freeholder
  • If the price paid is over £125,000, you will also need to pay Stamp Duty land tax

Is it worth it?

The question of whether or not leasehold enfranchisement will be worth the cost and bother involved will depend on a few deciding points:

  • Do you have a bad relationship with your freeholder? 
  • Are you wary of having to deal with another?
  • Are you and your neighbours happy to go through the enfranchisement and freehold management processes together?
  • Do you feel that your current fees, ground rent, service charges and other payments are unfair?
  • Does your lease have less than 85 years remaining? If you have less than 80, it could make your home very difficult to sell

Right to manage

If you cannot afford or do not want to buy your freehold, you also have the right to negotiate for the ‘right to manage’ for your block. You and your fellow leaseholders can form a ‘right to manage company’ to take on management responsibilities (or hire an agent to do so on your behalf). Your freeholder may also join the company. 

While this option is cheaper, it will not increase the value of your flat. You will still need to inform your freeholder of alterations or lettings and you will not have the right to decide lease extensions. Finally, you will also need to pay the freeholder’s professional fees.