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Buying Your Share of Freehold

Many owners of leasehold properties prefer the option of outright freehold purchase in principle because it does not need to cost a huge amount more than an individual lease extension, depending on how many properties in the building take part. There is also a romantic attachment to "owning" the property outright. This process involves serving a Section 13 Notice on the freeholder.

In practice, however, it is not always possible to complete the freehold purchase for a number of reasons. The main hurdle to achieve is that 50% or more of the owners in a separate building must agree to participate in the freehold purchase, in order for them to compel the freeholder to sell. However, not all of the other owners will necessarily have either the money or inclination to undertake the process.

In addition, freehold acquisition means creating a new company to buy the freehold and in many instances it can be difficult to find owners willing to be directors of that company and to run its affairs. There is considerable work, diplomacy and effort required to run the freehold company, and this is often underestimated.

Another impediment is that those participating need to cover the cost of those not participating. In essence, if 50% of the building were to proceed, it would be roughly twice the cost per participant compared with 100% deciding to go ahead.

If you can rally your neighbours and reach the 50% threshold, then buying your freehold becomes a possibility. Once the freehold is acquired, it is a formality with little additional cost to extend the lease to 999 years.

Leasehold properties with leases of this length are often marketed as freehold. However, this is actually technically incorrect; the property is still governed by a lease, even though the owner is both the leaseholder and a shareholder in the freehold company.


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