Owning a house without being the freeholder can be a dangerous thing indeed. In recent years several construction companies have come under fire for selling new builds without giving the freeholds over to the new owners, trapping them with increasing fees and ground rents simply because there are no solid regulations to stop them.
The good news is that the leaseholder of a house has the legal right to buy their property’s freehold, provided they meet certain qualifying criteria. All of this is outlined under the Leasehold Reform Act of 1967 and defined by the First Tier Tribunal (Property Chamber). That said, the actual process can be complicated and drawn out; if you want to purchase your property’s freehold, you are advised to first seek buying the freehold advice from a local conveyancer. They will be able to help you navigate the legalese involved so that you are not taken advantage of and give you a clear idea of the necessary costs before starting the process.
The ‘right to enfranchisement’ depends on certain qualifications for both you and your house:
When you purchase the freehold on a property, it will cover the ‘house and premises’. This includes any yard, garden, garage, outhouse or appurtenances let to the tenant with the house. This includes via a supplemental lease or deed.
A landlord can require the inclusion of the premises in a freehold sale where it would cause hardship or inconvenience for them to retain them. At the same time, they can also ask to retain additional premises if they have an interest in them, or if a hardship or inconvenience would be caused by not retaining them.
Before getting started, you are advised to contact a local conveyancer for buying the freehold/ enfranchisement advice. Taking an informal route and trying to deal directly with your freeholder can leave you vulnerable, while a professional will be able to navigate the legalese and ensure that you get a fair deal.
When you are ready, you will need to serve a ‘tenants notice’ to your freeholder, also known as the ‘revisioner’. If you have an intermediate landlord as well as a freeholder, you will need to serve notice to both of them. This is not as simple as letting them know over the phone: your notice will need to be filled out in an official format (a conveyancer can do this on your behalf).
Doing this will create a contract between all parties involved to grant and accept the freehold. Do not worry about including a price in your notice, as this can be decided at a later date. The notice should be served to the freeholder/ landlord’s last known address (in England and Wales) and signed by the tenants, joint tenants or an authorised agent.
From the date of the notice, the landlord has two months to serve a ‘notice in reply’. This should specify whether they ‘admit’ the claim or, if not, their grounds for refusal. Failing to serve such a notice can lead to financial consequences if the case goes to court. It can also prevent them from challenging the extent of the premises included in the claim.
At this point, the landlord can require you to pay a deposit amounting to around three times the property’s annual rent.
If the landlord admits your claim, Enfranchisement Regulations will then outline the required procedure and conditions of sale. Negotiations around the price will also begin. Once this is agreed, a requirement to complete the sale will be imposed, usually at least 4 weeks after the date of the agreement. If the parties involved cannot agree on the price, you can take the application to the First Tier Tribunal (or the Leasehold Valuation Tribunal in Wales). They will then determine the price and handle any disputes on the terms of the conveyance, such as the extent of the premises included in the transfer.
If, on the other hand, the landlord refuses to admit your claim, they will need to go to County Court to assert their right.
The purchase of the freehold can occur four weeks after the date of agreement for the price. This period will begin when either party gives a notice specifying the first working day following the four week period.
If either party fails to comply with either the statutory conditions or tenant’s notice, a two month ‘default’ notice can then be triggered by the opposing party. This should specify the default and refer to condition 10 of the statutory conditions, which requires the party to make good their obligations before the notice expires.
When a tenant fails to comply, the contract will be discharged and the landlord can then forfeit the deposit.
However, if a landlord fails to comply, the contract will be discharged, the deposit returned and the tenant will be free from having to pay the landlord’s costs. This can be a poor result for the tenant, as it will have undone all of their work. Instead, a tenant will usually acquire a court order forcing the landlord to complete the contract.