How do you calculate the purchase price of a freehold property?
There are massive advantages to buying the freehold on your flat or house because it can add value to its marketable price. You don’t have to worry about the lease running out and there would be no more payments on ground rent or maintenance charges.
Buying the freehold means that you own the property and have full control of how you want to manage and maintain it. However, buying back the freehold which is legally known as “Leasehold Enfranchisement” can be expensive and depends on the value of your property, the ground rent that you pay, and any other service charges.
Although it has been calculated that the average cost to buy back the freehold of your property is approximately £6000, this is only an average and the actual amount could vary considerably. This is especially the case when you take into consideration the regional variation in property prices for instance in London compared with areas in the North.
So, apart from the value of the property, the cost of ground rent, services charges, and solicitor’s fees, calculating the price of Leasehold Enfranchisement will depend on additional costs including:
- Valuation costs
- A tenant agreement
- Stamp duty fees
- Freeholder’s fees
An appropriately qualified surveyor will need to be employed to calculate a valuation report which will look at the length of the lease, ground rent, and overall condition of the flat or house.
A market value for the property can then be established so that a premium can be calculated and the leaseholder can be made aware of how much they need to pay to purchase the freehold.
The cost of the valuation will vary depending on the size of the freehold and whether there is only one flat or several in the block wanting to buy the freehold. The value to purchase the freehold will also be determined by the “marriage” value which is the “marriage” of the freehold with the leasehold. This is the increase in the value of the property which the law says is split equally between the leaseholder and the freeholder. Although you may informally agree to a price with your freeholder to buy the freehold, in most cases a valuation will be required.
While it is not essential to have this tenant agreement, it is recommended to get your solicitor to draw one up before the freehold is bought, so that the whole process is made perfectly clear in writing to both the leaseholder and freeholder
If the freehold exceeds £250k you would need to pay stamp duty on the property. The amount that you pay will vary and will also depend on whether this is your only home. If you do own more than one property the amount of stamp duty that you pay will increase, so it is worth bearing this in mind.
These include legal fees and the cost of a surveyor who will provide a survey for your property. The costs again can vary but will be similar to those associated with the average conveyancing fees for selling a house which can be between £1000 and £2000.
Are you entitled to buy the freehold?
Before you embark on this expensive and time-consuming process, it’s important to consider whether you qualify to buy the freehold of a leasehold property. In order to do so you have to make sure:
- The lease is not less than 21 years in length
- The building is self-contained
- At least 50% of the flats in a building have agreed to collective enfranchisement
How Can GloverPriest Help?
At GloverPriest, we provide friendly and transparent legal advice. If you would like further advice about your property, please don’t hesitate to speak to one of our expert conveyancing lawyers today. Complete our enquiry form.