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Buying share of freehold (collective enfranchisement)
We're thinking of buying a share of our freehold with the other people in our building.
Has anyone ever done this? Any idea how expensive it is and how long it takes?
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The cost will depend on a number of factors, the most important of which is the number of years left on the lease. Once the lease drops below 80 years, things get much more expensive (it will also be hard to sell your flat if your lease gets much below this). I've just paid *thousands* of pounds for my share of the freehold because of this. I think that the rest of the cost depends on the amount of ground rent that the freeholder is in effect giving up by selling you the freehold, so this can vary considerably.
It took us quite a long time to do, because (a) our initial solicitor was not very good (b) every time we had to make a decision, we all (four flat owners) had to agree (c) the freeholder was extremely awkward. More than two years from start to finish.
Whether it's worth doing or not depends on your other options. Once the lease drops below 80 years, you'll either want to buy the freehold or extend the lease, and - in our case - the latter wasn't much cheaper than the former. Owning the freehold gives you more control over decision-making, and it also makes the flat more valuable in the long-run. But it has eaten up a large chunk of my savings....
There is a formula for working out what the freehold will cost, based on a valuation of the property. So there is a bit of grey area, but not a great deal.
The freeholder is likely to reject your offer and put in a counter-offer. If you can't come to an agreement, you will end up at a tribunal, but this will cost you more in fees and I *think* that there is an expectation that you try to negotiate first. I may be wrong about this.
In our case, a combination of our initially poor solicitor and their delaying tactics pushed us beyond the 80 years. They simply took a long time to respond to everything. But I think that there's a fairly set timetable that comes into play once you formally submit your application to purchase. It gives something like six months for you to negotiate before you go to tribunal.
I may be wrong about some of these details - I'll whisper you the email address of the (much better) solicitor we got to finish the job. Good luck!
Regardless of the landlord being absent we ended up having to pay £27k between the two flats (much more than the solicitors originally said) and then there were solictors fees which were about another £8,000 per flat. We only had 70 years left on our lease.
It also took about 2 years to conclude and we extended the lease which cost about £450 per flat.
Hopefully your freehold won't cost as much.
If you go to http://www.lease-advice.org/ you will find some info on buying the freehold.
I am a valuer specialising in this area: the premium you have to pay depends on lots of factors but most importantly the number of years which remain on the various leases. In the case of a 2 flat conversion, both leaseholders have to 'participate', where there are more than 2 flats in a conversion at least 50% of the leaseholders have to participate.
I hope this helps.