The Developers and house-builders of late have started selling leasehold houses as it guarantees them an extra income stream through ground rent or from selling on the leases to investment companies.
The legal owners of Leasehold houses often have to pay high ground rent and also pay fee to obtain the Landlord’s consent for making alterations to their homes. A leasehold house can also be difficult to sell. As a result, most house buyers regret buying a leasehold house.
The Secretary of State for Housing, James Brokenshire, announced last year that housing developers would no longer be able to use any new government funding schemes for unjustified new leasehold houses.
If who own a leasehold house and wish to acquire the freehold or extend the lease you can either negotiate with the landlord/freeholder informally to buy the freehold by agreement or exercise your statutory right under the Leasehold Reform Act 1967 (as amended). The Leasehold Reform Act 1967 gives a tenant of a house under a long lease a statutory right to acquire the freehold of the house or take a new lease for an additional 50 years.
The right to acquire the freehold under the Leasehold Reform Act 1967 is termed as enfranchisement. The right to enfranchise is dependent on number of qualifications for the house, the lease and the leaseholder.
The qualifications are:
- The property must be a house: It must be a building reasonably considered a house, divided vertically from any adjoining house. It is not relevant if the building has been divided into flats so long as you have a lease of the whole house. Certain buildings containing commercial premises can qualify as a house. A lease of a building comprising a shop with a flat above may qualify for enfranchisement.
- The lease must be a long lease, originally for a term of more than 21 years or with a right to renewal.
- A tenant to qualify for enfranchisement under the Act must be a leaseholder of the house at the time of making the application for enfranchisement and
should have held the lease for the past two years. There is no residency qualification, only one of ownership. This means that it is no longer necessary for the person exercising the right to have lived in the property.
In order to acquire the freehold of your house you will have to pay a premium to the landlord/freeholder. The formulae for ascertaining the value of the freehold is complex. It primarily based on the ground rents and the length of the lease.
It is advisable to commission a professional valuation before bringing a claim to purchase the freehold. It is important to have an idea at the outset and before you start the process of what your costs will be and if you can afford it. In addition to the premium, you will have to pay the landlord’s reasonable professional costs which will normally be solicitors’ and surveyor’s fees. The landlord will ask you for a statutory deposit which is three times the annual rent payable when the notice of claim is issued.
The Leasehold Reform Act 1967 sets out a procedure and timescales to be followed to acquire the freehold of your Leasehold house. The Tribunal can determine the price and terms of acquisition if you fail to reach an agreement with the Landlord.
Buying the freehold can be a complex and difficult process. We at Connaughts have a team of experienced solicitors who can assist and advice you on the process of acquiring the freehold of your leasehold house.
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