If you or a group of residents purchase the freehold, then usually any lease extension would be agreed between the participants at no extra cost and also waiving the ground rent.
Owning the freehold means control is taken over the management of the building or the choice of property management company to appoint.
Your flat with a share in the freehold is more attractive to buyers and will be easier to sell.
- How much do we pay?
This can be complex as it depends on the number of factors such as length of unexpired terms of the leases, value of the ground rents and their reviews.
Also, you have costs of solicitors and valuers. You also pay the landlord’s costs and the company formation costs. As this is a conveyancing transaction, there will be other payments to third parties such as Land Registry fees, searches and Stamp Duty. Furthermore, if a claim has to be referred to the First-Tier Tribunal as negotiations with the freeholder have been unsuccessful, then you will incur additional costs.
- Do we need a company?
On the whole, this is recommended, particularly where there are more than 4 flats in the building. It would be a company limited by shares and each participating leaseholder having a share.
- How to start
- Form a committee (dependent on how many leaseholders involved) and choose a person(s) to lead
- Instruct a solicitor
- Instruct a valuer
- Consider a Participation Agreement to ensure there is a binding commitment once all the facts are known in terms of costs and the process. Such an agreement will set out how the cost and the price of the freehold will be divided and what happens if a leaseholder drops out.