One of the most important things which you need to pay attention to when going ahead with buying the freehold of your block is the costs. Freehold purchase, [which is also sometimes known as freehold, collective or leasehold enfranchisement] and every process varies according to the length of time it takes to conclude and the type of property involved.
Got questions about Freehold Purchase? Looking for an introduction to a specialist valuer? Call our expert team on FREEPHONE 0800 1404544 for FREE Initial Phone Advice.
Getting an accurate valuation is crucial when buying your freehold
One set of costs which you really shouldn’t try to avoid when going through the process of freehold enfranchisement relate to the valuation fees charged by a chartered surveyor with plenty of freehold purchase experience. It’s the surveyor’s job to agree the valuation for the freehold, so it’s very important to work with a surveyor who specialises in the enfranchisement field.
Our expert surveyor’s panel
There aren’t many surveyors who do this sort of valuation work regularly – however, if you instruct our team as your solicitors, we are more than happy to not only recommend one of a network we have developed of specialist local surveyors, with whom we have worked with successfully on similar cases in the past, but we are also happy to instruct them, if you wish, on your behalf.
Calculation of the premium
Although the Leasehold Reform Housing & Urban Development Act 1993 contains a formula for calculating the amount you will need to pay to your freeholder to purchase the freehold of your block (a price referred to as the premium), calculation is more of an art than a science.
Therefore don’t expect two different valuers to come up with exactly the same price – especially if one of those values represents you as the leaseholders and the other acts for the the freeholder, who is obviously going to want the best possible sale price.
The premium is calculated based on the following information:
- ground rent income
- reversionary value of the freehold on expiry of the leases (the reversion)
- the marriage value – each refers to the increase in the value of the block after enfranchisement.
- other land or buildings – including garages
- compensation for other losses – this is meant to cover the loss of value to the freeholder of a variety of possible factors including the possibility of future development and loss of any access to an adjoining site
The importance of getting the valuation right.
Although it’s not unusual for any 2 surveyors, however experienced, to come up with differing valuations, they both normally agree on a rough band of the lowest and highest likely reasonable premium.
And that’s important. Because one of the grounds on which a freeholder can apply to court to have the original Section 13 Freehold Purchase Notice declared invalid is that it’s asking too extreme a price. And if the notice is invalid, that ends the application and the leaseholders cannot put in a further application for 12 months. That could mean not only significant delay for your project but will also entail a lot of legal and valuation costs being wasted.
N.B. And that’s why you need the right valuer – to make sure you put in a sensible initial figure in your Section 13 Notice.
Click here to read more about the Section 13 Freehold Purchase Notice
Additional costs involved in freehold purchase
In addition to surveyor costs, solicitor’s fees will also have to be paid. Just like appointing the right surveyor, it is essential to find a specialist solicitor. Remember that even solicitors who specialise in property law or conveyancing deal will have dealt with enfranchisement before. Unless you live in a town with a large number of leasehold flats, such as Brighton, London or Bournemouth, you are likely to have to look outside your local area to find a specialist solicitor and communicate online or by telephone rather than face to face.
That’s where we come in. Lease extension and enfranchisement are all our specialist team does – and every year we act for hundreds of freeholders and leaseholders throughout England and Wales.
What will my solicitor do?
Your solicitor’s legal fees will include the costs associated with serving notice on the freeholder of the property, establishing a new freehold management company, costs incurred when transferring the freehold to the new company and drawing up the new leases.
If the landlord or freeholder is uncooperative, and the case ends up being decided by the First Tier Property Tribunal, this will also incur additional legal costs.
With almost all freehold purchase applications, we recommend that a Participation Agreement be drawn up. this legally binds in all participating leaseholders and clearly sets out the basis on which the freehold purchase will take place – including clarification of the contribution of each leasehold involved in the enfranchisement process.
It is also usual for each of the participating leaseholders to grant themselves a new 999 year lease with a peppercorn rent (i.e. effectively no ground rent). Your solicitor will also need to charge for this.
In addition to your own solicitors costs, exercising the right to buy the freehold of your block means that you will also have to pay the “reasonable” legal costs of your freeholder aid, and these costs include their solicitor’s fees, the cost of conveyancing and the cost of having a valuation produced by their own valuer.
Setting Up A New Freehold Company
If a new company is set up to manage the freehold of the block, then particularly with most medium and large sized blocks, managing agents be required to run the building on behalf of the leasehold – though depending on the size of your block and the enthusiasm of you and the others taking part in the enfranchisement process, you may wish to take on this role yourselves.
If not, then the associated ongoing payments to a management company have to be factored into the overall costs when it comes to planning your freehold acquisition.
Considering Buying your Freehold? Contact us today
Freehold Purchase is a complex business and you are going to need specialist legal advice. Whether your block is based in England and Wales, our expert team is here to help.
Get in touch with us now for a FREE first phone consultation on your Freehold Purchase;
- Call our specialist enfranchisement team today on FREEPHONE 0800 1404544
- Or email us using the contact form below