Leaseholders Right To Buy the Freehold of their Property
The Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) permits a majority of qualifying Lessees acting together to purchase the freehold of their building.
Lessees are required to serve a notice on the Landlord providing certain relevant information and including the price that they are prepared to pay. The Landlord must then serve a counter notice if he disagrees with the offer. The Act provides for the parties to negotiate on the price, but if the parties cannot agree a reference may be made to the Leasehold Valuation Tribunal to determine a fair price.
The price will depend principally on the value of the individual flats and the length of time remaining on the leases. Where there is less than 80 years left to run the Landlord will be able to claim for 50% of the marriage value. (Marriage value is the difference in price between the value of the freehold and the aggregate of the value of the interests of the Lessees and the Landlords interest).
The Purchasing Lessees will be required to pay the Landlord’s reasonable valuation and legal costs. However, each side will pay their own costs in respect of any appearance before the Leasehold Valuation Tribunal.
It is important to ensure that any purchasing group has their finance lined up well in advance. If one pulls out of the proceedings half way through, there will still be a liability to pay the Landlord’s costs to date and these could easily run to several thousands of pounds. We recommend that there is a binding agreement between the participants prior to commencement which will protect the parties and identify who will be responsible for any costs.
If you are thinking about purchasing your freehold, we would be happy to provide further advice in relation thereto.