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Collective Enfranchisement

What is Collective Enfranchisement?

Once you have owned a Leasehold flat for more than 2 years you have the right to buy the Freehold.

You may not be able to buy it alone, you will need to involve at least 50% of the Leaseholders in the property this is called Collective Enfranchisement.

The Collective buying of your Freehold can save you from any unfair service charges, or paying ground rent and will add appeal and value to your flat.

The Freehold is then owned by a limited company. You and your neighbours (who have collectively purchased the Freehold) become shareholders of the company. So while the flat remain Leasehold, you own part of the Freehold.

The cost of purchasing your Freehold is similar to a 90-year lease extension (on all of the flats) and follows almost the same process, the only additional costs are; the purchase of the non-participant interests and the associated legal fees required for the Freehold purchase.

Allied Surveyors are experts at providing experienced impartial advice throughout every step of your collective enfranchisement.

Not only can we provide an initial assessment and report to enable you or your legal adviser to serve notice, but we can also help you negotiate an amicable settlement and if necessary; represent you at the Tribunal if a settlement cannot be reached.

If you own a Leasehold house then you can Purchase your Freehold on your own.

Do I need to buying my Freehold?

Truth is no, there is no cost benefit to purchasing your Freehold, estimates put the Market Value benefit at only about 1%.

But if you are considering renewing your lease, then it is defenatly worth considering as there is only a marginal difference in cost.

The benefits of collectively purchasing the Freehold are:

  • Free Lease Extensions - When you buy your Freehold you can usually extend the Lease to 999 years for free. The only cost would be the legal fees.
  • Service Charges - You are part of the limited company which makes the decisions on services provided and charges.
  • Ground Rent - You normally don't need to pay ground rent.
  • Fewer Conditions - You can be free from conditions placed on the property by the Lease (e.g. pets or letting the property).
  • Added Appeal - While purchasing the Freehold may not add much value to your property, buyers prefer properties with their own Freehold.

The cautions of collectively purchasing the Freehold are:

  • The Cost - While purchasing your Freehold is more costly than extending your lease, the added benefits will eventually outweigh the additional cost.
  • Your Neighbours - If you live in a block of flats, then you will need to arange the purchase with the other owners.
  • Non-participants - You will be purchasing the Freeholders interests of any non-participants, however when they wish to extend their leases they will have to purchase from you.
  • Lease Conditions - After you purchase the Freehold, any conditions in the leases stay exactly the same, untill the company changes them (you will need to get a solicitor to draft these changes).

How much does buying my Freehold cost?

The cost of purchasing a Freehold is similar to what you will have to pay to extend your lease for 90 years.

The cost of a lease extension normally depends on these major factors:

  • The value of the property.
  • The number of years left on the lease.
  • The start date of the lease and Rateable Value.
  • The annual ground rent.
  • The value of property improvements.
  • Additional external factors such as Court Decisions.

Unfortunatly the cost of extending your lease is as subjective as defining the value of a property. This makes knowing the right amount to offer difficult to calculate.

We can help you to determine how much it should cost you to purchase the Freehold and help you negotiate with the Freeholder.

Effects of not purchasing your Freehold or extending your Lease

  • 100+ Years remaining – At this stage there is no issues with the lease and you should have no problem selling or mortgaging your property.
  • 90 Years remaining – There is still no major issues at this stage with the lease and you should have no problem selling or mortgaging your property.

    You should now start to consider extending your lease or purchasing your Freehold.
  • Below 80 Years remaining – This is the stage where the real problems start, it is now effecting the market value of your property and “Marriage Value” has to be taken into consideration.

    The cost of purchasing your Freehold or extending the Lease will now cost you more for every year you delay.
  • 70 Years remaining – Your property has now become more difficult to mortgage as some lenders may not give loans on properties with short leases.

    The cost of purchasing the Freehold or extending the Lease is now significant enough to deter potential purchasers and/or cause a drop in value.
  • 60 Years remaining – Your property has now become very difficult to mortgage. The market value of your property will now be significantly less than that of similar properties with longer leases.
  • 50 Years remaining – You are now unlikely to be able sell your propery as most mortgage lenders will not consider lending with such a short lease remaining.

    At this stage you will be limited to cash buyers and property investors only. By now as much as 20% could have been wiped off the true market value of your property.
  • Below 50 Years remaining – Your propery will continue to lose market value until the lease expires.
  • 0 Years remaining – Your propery has effectively become worthless, you no longer own it, it has become the property of the landlord.

What is “Marriage Value” and how could it effect your Lease extension?

Under the 1993 Leasehold Reform Act, the landlord is entitled to half of the increase in the value of the property when a property with less than 80 years Lease is extended. This is called the “Marriage Value”.

So if extending you Lease adds £5,000 to the value of your property, you will have to pay an additional charge of £2,500 to extend your Lease, in addition to the cost of the longer Lease.

This additional charge can be avoided by taking action before your Lease has less than 80 years remaining.

Where do Allied Surveyors carry out Collective Enfranchisements?

Allied Surveyors carry out Collective Enfranchisements nationwide.

Our office specialises in the greater West Midlands area including; Birmingham, Coventry, Staffordshire and Redditch. We also cover Shropshire, Central Wales and the Welsh Border.

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