New Build House Owners – Guide to buying your Freehold

If you purchased a new build home from one of the large builders over the last decade you may have purchased a leasehold home.

Leasehold properties were traditionally associated with flats and apartments with shared communal areas and grounds for maintenance. However, in the last decade or so, large builders have sold houses as leasehold to then retain the freehold to generate a ground rent income or to transfer it as an asset to a management company.

However, only in rare circumstances, should be the need for a house to be Leasehold. The Government recognised the problem in 2017, when Sajid Javid, said he wanted to end the “feudal practice” because of concerns of unfair practices by Landlords, inflating ground rents and maintenance and charges unreasonably. It is thought that this practice effects over half a million homes in the England and in some cases has left the owners unable to sell the property or remortgage.

So, what can be done?

If you own a house which is leasehold, then you can buy the freehold title from the Landlord, if you have owned the property for more than 2 years. If the Freeholder is a commercial landlord such as a private equity or investment company, then you may find some resistance to your request, mainly because the reason they bought the Freehold in the first place was to receive guaranteed income from increasing ground rent and service charges. But do not let this deter you, ultimately the decision would come down to arbitration and given the government’s position with these kinds of Leasehold properties they would have to provide a convincing reason why you cannot buy your Freehold.

So how do you go about buying the freehold title to your property?

The first step would be to instruct an expert property lawyer who would contact the Freeholder and make enquiries whether they would sell the Freehold. If the Freeholder does not respond to your request, then your lawyer will issue them with what is known as a “Tenants Notice” which legally gives the Freeholder notice that you intend to buy the Freehold. The Landlord/Freeholder, then has two months to respond, either accepting your request or setting out reasons for their refusal. As with any property, you also need to instruct a surveyor to value the Freehold, once you have the valuation, you and your lawyers will then negotiate a price for the Freehold. If you are unable to negotiate a reasonable price for the Freehold, or the Landlord refuses or does not respond, then you will then be referred to First Tier Tribunal for a decision. This may all sound very complicated and protracted, however, in most cases, the Landlord will respond and you will be able to agree a value without the need to issue a Tenants Notice or eventual referral to an arbitrator.

So, what are the benefits of owning your Freehold?

Financially, you will no longer have to pay ground rent which in some cases can double every 10 years. Also, if you fail to pay your ground rent, you could be repossessed under the terms of your lease. You will also no longer have to seek permission of the Landlord to make alterations or improvements to your property, which can be restrictive and unreasonable given you own the house just not the land it occupies. You can have pets, yes believe it or not some lease terms even prohibit you having a pet, running a business from home and subletting. There is also a real risk that the fewer years are left on the lease, the harder it will be to sell the property (so you may not benefit from increasing property prices) or remortgage.

If you are thinking of buying your Freehold, you may also want to consider collaborating with your neighbours who also want to buy. This can often reduce the legal costs in buying your Freehold, because the same lawyer can undertake the work for several neighbours reducing the overall legal costs.

If you would like some advice about buying your Freehold, then get in touch, our experts would be happy to talk through your options, so you can make a reasoned decision whether buying your Freehold is right for you.

If you have been offered to purchase your Freehold, we can offer very competitive fixed fees for the purchase.