Our Leasehold Enfranchisement Team are available on 01225 462871. Alternatively, you can email them, or complete the Contact Form at the foot of this page.
What’s the difference between leasehold and freehold?
Around one in five homes in England are leasehold. Despite that, evidence suggests that many people purchasing a leasehold property do not fully understand the difference between freehold and leasehold.
Put simply, if you are a freeholder, you own the building and the land it stands upon outright and in perpetuity. On the other hand, a leaseholder has a lease from the freeholder which entitles them to occupy the property for the number of years specified in the lease. A new lease can be for any term, but typically it will be 99 or 125 years. However, some leases are for as long as 999 years. At the end of the lease term, all the leaseholder’s rights and interests in the property cease and it reverts to the freeholder.
There are likely to be certain annual costs with leasehold property, namely ground rent and service charges.
When a leaseholder sells their house, the purchaser acquires the remainder of the lease term.
If certain conditions are met, and you can raise the money, you can extend your lease by:
- 90 years for a flat; or
- 50 years on a house.
However, it may also be possible to purchase the freehold of your home.
Leasehold Reform (Ground Rent) Act 2022
Following an investigation by the Competition and Markets Authority, the Leasehold Reform (Ground Rent) Bill was introduced before parliament, receiving Royal Assent on 8th February 2022. It will come into force in stages and aims to address unfair practices in the residential leasehold system. This follows a ban on the leasehold sale of most new-build single-dwelling houses, a practice that had become common with developers in recent years. In many cases, the ground rent on those properties is doubling every few years, resulting in them being unsaleable.
Is it worth buying the freehold of my leasehold property?
There are several potential advantages to buying the freehold of your leasehold property, including:
- You will no longer have to pay ground rent and service charges.
- You will not need permission from the freeholder to make changes to the property – for which they will also usually charge a fee.
- Leases usually contain restrictive covenants which can ban or restrict your ability to do certain things such as running a business from home, sub-letting, or keeping pets.
- The fewer the number of years left on the lease, the harder it will be to sell the property or obtain a mortgage on it. You may be able to pay to extend the term of your lease, but it will still be a lease.
- Perhaps the greatest disadvantage of being a leaseholder is that your freeholder may view you as a ‘cash cow’. We have mentioned above the scandal of leasehold houses. A freeholder – typically a developer – may also sell your freehold to a third party who may be even more exploitative of you.
What is collective enfranchisement?
Leasehold enfranchisement, which is also known as collective enfranchisement, is your statutory right as a flat owner to buy the freehold of your building, even if your freeholder objects. You will need to form a majority group of flat owners before you can collectively exercise your right to enfranchise. And in return for leasehold enfranchisement, you will also have to pay a fair price, as well as a contribution towards your freeholder’s costs.
What are the rights of enfranchisement?
As a flat owner, your right to enfranchise is contained in the Leasehold Reform Act 1993. It allows a majority group of tenants to become their own landlord, enabling them to grant themselves long leases of up to 999 years with no ground rent.
What are the benefits of leasehold enfranchisement?
Buying your freehold gives you and your fellow tenants control. It means:
- You gain ownership and take over the running of the common areas.
- You will no longer have to pay ground rent.
- You can choose your service providers who may offer better value for money than those chosen by your freeholder.
- As the freeholder, you will not have to pay to extend your lease and can extend it to 999 years.
- Buying the freehold often adds value to your property and may make it easier to raise a mortgage.
- You can free yourself from restrictive covenants.