Here we break down the differences between leaseholds and freeholds and provide a step-by-step guide on what you might need to do to buy the freehold of your house or flat.
Before we go into the ins and outs of buying a freehold, let’s first examine what this term actually means.
When we talk about ‘freehold’, we’re referring to properties where you own not only the building itself but also the land it sits on.
If you’re the freeholder, you have total ownership. You will be responsible for maintaining everything yourself rather than paying someone else to do it for you.
The significant benefits of being a freeholder include:
You’ll have more control when it comes to refurbishing the building and garden (if applicable)
You won’t pay any building service charges
You won’t pay ground rent to the freeholder
You won’t face any additional restrictions like not having pets in the building or not being able to sublet a spare room
Leasehold properties are essentially the opposite of freeholds. They’re when you own the building (or part of it if you’re in a flat), but you don’t own the land that it sits on or any communal areas. These are leased out to you as part of the terms of sale, and you’ll pay service charges and ground rent to the freeholder who is, in effect, a landlord.
Typically, the leasehold on a property will be valid for between 90 and 999 years. You might sometimes find it shorter than this, meaning it could need renewing while you still own or live in the property. It’s more common for flats or apartments to be sold as leaseholds, although you might find some new-build houses are, too.
While being in a leasehold can take some of the stress and responsibility out of owning and maintaining a property, you might prefer to have the freedom to do whatever you like with it.
Suppose you like the idea of taking complete control and not paying any additional fees. In that case, you might find that you’re able to buy the freehold. This is especially true if you live in a block of flats and other homeowners in the building are also keen to purchase their freeholds.
Buying your freehold has numerous benefits, including the fact that it removes the risk of not renewing your leasehold from the current freeholder when it comes to an end. What’s more, leaseholds can often cost thousands of pounds – a cost you’ll have to pay yourself.
Unfortunately, buying a freehold can be a little complicated to arrange. If you’re a flat owner, you’ll need to do it through a process called collective enfranchisement. To simplify what that process might involve, we’ve put together a step-by-step guide to buying the freehold of a leasehold property.
1. Check if it’s even possible to buy your freehold
Before you do anything else, you’ll want to first check that you are, in fact, able to buy the freehold of your property. You’ll need to pass specific criteria to be eligible:
Your building has to have more than two flats in it
At least 75% of the building must be used for residential purposes (only a quarter of the space can be taken up by shops or office units)
Two thirds (or more) of the flats in the building should be owned by people with long leaseholds, for example, leaseholds that have more than 21 years to go
You’ll need to get half of the leaseholders in the building on board
It’s also good practice to see if the current freeholder is actually open to selling their freehold. Legally, if they are keen to sell, they have to offer it to the flat owners before any third parties.
2. See if your neighbours are also interested in buying their freehold
One of the main criteria of buying your flat or apartment block freehold is that at least half the residents are also interested in buying theirs.
It’s a good idea to knock on your neighbours’ doors (or ask them in a community group chat) if they’re keen to buy their freehold. Having control of your freehold can bring many benefits, including controlling how much money is being spent on communal areas.
3. Work out the cost of the freehold
Buying your freehold can be pricey, meaning it’s not always an option for everyone. Once you’ve got a group of fellow flat owners interested, the first thing you’ll want to do is work out what you might all need to pay.
You might get a valuation from a surveyor or contact a solicitor to provide an estimate. You can also get an idea of what your freehold might cost by working out how much it would cost to extend your current leasehold by 90 years (the figure is roughly the same). What’s more, you’ll find several online calculator tools online to help you work out the freehold price.
4. Contact your mortgage company (if applicable)
Once you have an idea of the cost of your freehold, you’ll want to contact your mortgage company to see if they’ll extend your current mortgage to cover the extra cost. Most should be willing to do this, although there will be some exceptions. For that reason, it’s sensible to check earlier down the line and before you’ve signed any paperwork.
It’s not out of the question that you’ll need to apply for a new mortgage to incorporate your freehold costs. You can find out more about what this process might involve on our mortgage page. It’s also packed with handy guides and features, including our mortgage calculator and our comparison tool, which lets you compare mortgages from all the top UK lenders.
5. Find a solicitor
Just like buying a house or flat, you’ll need a solicitor to finalise the legal side of securing your freehold. The fees for this will vary. You’ll want to find a solicitor specialising in this type of work and is ideally a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).
Your solicitor will give you advice and draw up any paperwork, including a participation agreement. This is a legal contract which will be signed by all the flat owners in your building who are keen to buy their freeholds.
6. Get a valuation
If you’ve not already had a valuation done to work out the cost of your freehold, now is the time to do it. You should go through a surveyor experienced in valuing properties for those wanting to buy their freeholds.
7. Decide on a nominee purchaser or set up a company
Next up, you’ll need to nominate someone in your building to be in charge of the freehold purchase (known as the ‘nominee purchaser’) or set up a company for the whole group to join. The latter is usually a more accessible option as it gives everyone equal responsibility and rights.
8. Send the current freeholder a request to buy
Your solicitor will now send your current freeholder a tenant’s notice. This will be signed by all the leaseholders who want to buy their freeholds. The freeholder then has 2 months to reply. Bear in mind that they don’t need to sell you the freehold if they don’t want to; however, they should have a good reason for refusing.
Some freeholders may ask for a large deposit to purchase the freehold. Nevertheless, you can usually negotiate this – and the freehold’s total price – through your solicitor. Suppose the freeholder fails to reply to your tenant’s notice. In that case, you can take it to the First-Tier Tribunal to be reviewed by legal professionals.
Most houses in the UK are sold as freeholds, although you might find some homes – like new builds and shared-ownership properties – are still leaseholds. If this is the case and you’d like to buy the freehold, it could still be possible.
Buying a house’s freehold is often a little more complicated than buying the freehold of a flat. While you won’t have other leaseholders to deal with in the building, you might find the freeholder of your home is very reluctant to give it up. Having good legal advice will be crucial.
You’ll find the process is very similar to buying the freehold of a flat. You’ll still be able to take the case to the First-Tier Tribunal if the freeholder is being tricky. Remember, if the freehold is likely to cost over £125,000, you may need to pay stamp duty.
If you’re unable to buy the freehold of your flat, it might be possible for you and any other leaseholders in your building to have a hand in managing it instead. By this, we mean you’ll have better control of what work is completed and what service fees are charged.
This process is known as the ‘right to manage’. It’s an option for most leaseholders, thanks to the Commonhold and Leasehold Reform Act 2002. The criteria are the same for buying the freehold (you’ll still need 50% of the leaseholders to be involved). Still, it usually takes less time and is free except for any legal fees.
Note that not all buildings are eligible for the right to manage. For instance, if any of the flats in your building are owned by a local housing authority, you won’t be able to arrange the right to manage. Suppose you can and you’re successful. In that case, you’ll form a company with the other leaseholders and the freeholder to control the building’s management. This ensures you get an equal say in what work is done, who does it, and any fees charged.
The main difference between buying a freehold and achieving the right to manage is that you’ll still pay to renew your leasehold with the latter. Securing the right to manage also won’t add any value to your property when you come to sell. It does give you more power over what happens in the building and what your service fees go towards.
If you’re unsure whether it’s a good idea to buy your freehold or try for the right to manage, speak to an expert for impartial advice. You’ll also find more information in our guide to leasehold properties.