Leasehold to Freehold – Should You Make the Switch?
Are you the leaseholder of a property? Then did you know that you may also have the right to buy your house or flat outright, so that you own the freehold?
Whilst there can be lengthy procedures and costs involved in the process of buying a freehold, for some, the idea of greater protection and control over their property is an appealing one.
But should you take the leap from leaseholder to freeholder? Read on, to find out how making the switch can change your role as a property owner.
What’s The Difference?
So what exactly is the difference between being a leaseholder and a freeholder?
As the leaseholder, you own the right to occupy the property for the length of the lease. As a freeholder however, you are the sole owner of the entire property as well as the land it stands on.
Whilst the majority of houses are freehold, flats will typically be leasehold. A freeholder will own the land and the building that your flat is in, usually known as the landlord. You will then have to pay charges to the landlord, including ground rent and maintenance fees.
How can you go from being the leaseholder of your individual flat to the freeholder of the property?
One option is to get together with other flat owners living in your building and then buy the freehold as a collective. This is known as ‘enfranchisement’.
One benefit of buying the freehold this way is that you’re effectively buying the property for the same amount that it would cost to extend your lease. However, this will depend on the number of tenants choosing to participate as well as your lease’s terms.
Buying the freehold of your apartment building can be a lengthy process and you will have to ensure that the building – as well as all participating flat owners – are eligible before you go ahead. But with the right professional advice, the process of enfranchisement can prove invaluable.
Buying the Freehold on a Leasehold Property – The Pros and Cons
PRO The control! Both the property and land are completely yours, giving you complete control over how you choose to manage the property.
PRO You can increase the value of your property, resulting in larger profit should you ever choose to sell.
PRO You are no longer required to pay ground rent charges. For an average flat, the annual ground charges can amount to over at least £1000.00 a year.
PRO Unfortunately, disputes between the freeholder and leaseholders can be very common. Expensive fees, maintenance and lease terms often being the biggest source of contention. As a freeholder, these disputes become a thing of the past.
PRO Maintenance and building work can be completed as and when you wish, convenient to your time, budget and tastes.
PRO You can get Building Insurance from a company you choose and trust.
PRO You no longer have to worry about a dwindling lease and the effect it would have on the value of your home.
CON As freeholder, you will become responsible for the maintenance and repair of the property, as well as any flat owners living in the building as leaseholders. However, this is something you can always outsource to a trusted managing agent.
Why Should I Extend My Lease?
Whilst there are many advantages to becoming the freeholder of your property, many people are still happy to remain a leaseholder on their flat. If you do choose to remain a leaseholder on your property, extending your lease is something you’ll still want to consider.
This is because as a lease reduces in length, it will only become more expensive and difficult to extend. As a rule of thumb, you do not want to let your lease drop below 85 years. This is when extending your lease becomes pricey, making the sale of your property more difficult should you decide to move.
If you’re keen to protect the value of your flat and save yourself money, look to notify your building’s freeholder and purchase a lease extension for at least 90 years.
How We Can Help You
Freehold or leasehold – if you’re looking to purchase a property, we will find you the best mortgage rates from the UK’s top lenders. So why not contact a member of our friendly team today? Call us on – 01702 619221