Although it is generally quicker and less complicated to extend your lease on an individual basis the Leasehold Reform Housing and Urban Development Act 1993 also gives you the option of purchasing the freehold (sometimes called enfranchisement). The Act enables a group of leaseholders to cooperate together to apply to the freeholder of their building to purchase the freehold.
The purchase of the freehold gives you the benefit not only of being able to extend your own lease on any terms you wish but also enables you to run your own affairs and management of the building in which your flat is situated.
There are some conditions that need to be met before you are able to apply to the Landlord to purchase the freehold of the building and they are:-
(a) The building must have a minimum of at least two flats.
(b) Where there are only two flats both leaseholders must participate.
(c) In a larger block of flats the number of leaseholders who wish to participate must represent at least 50% of the flats of the building.
(d) There must not be more than 25% of the internal floor area of the building in non residential use, for instance a shop, restaurant or office on the ground floor.
The basis of the cost of the purchase of the freehold is similar to the calculation for the extension of individual leases although the calculation can be more complex if some of the participating tenants in the purchase of the freehold have longer leases than others.
This may give rise to the requirement for negotiation between the participating leaseholders as to how much each of them will contribute.
There are additional benefits in purchasing the freehold in that you may make a saving on legal and administrative costs by co-operating with a number of leaseholders in negotiating a better deal. You also obtain the benefit of being in charge of the management and maintenance of the block and its insurance although this is likely to be a bigger benefit in a larger block than a small one.
The disadvantage of purchasing the freehold as opposed to extending the lease, however, is that in any purchase of the freehold you are required to cooperate and negotiate with your fellow leaseholders and, as in any co-operative venture, this can produce tensions and disagreements which may complicate and extend the process in that you will be negotiating not only with the freeholder but also with your fellow leaseholders.
We will be very happy to assist you in making this decision in the context of your individual circumstances.
As in an individual lease extension the first step should be to obtain a professional valuation of the cost of extending the freehold. Please contact us so that we can give you a quotation which will, of course, depend on a number of circumstances including the size of the block and the number of participating freeholders.