Buying your freehold
Provided your flat is in a building which comprises either two flats and both leaseholders wish to participate, or more than two flats and at least 50% of the leaseholders wish to participate, you will be entitled to do this. In addition, two-thirds of the flats in the building must be “qualifying flats”, i.e. flats owned on long leases and not let out on short tenancies by the freeholder.
Your first step is likely to involve drawing up an agreement (known as a participation agreement) between the participating leaseholders. This sets out the basis upon which you propose to buy your building. The participation agreement can be as simple or as detailed as you want, and we can advise and assist you on this. Quite often a simple participation letter is all that is required. Please ask for details of these costs.
Once all leaseholders agree they wish to proceed, the next step is for an RTE (right to enfranchise) company to be set up, through which the freehold property will be purchased. It is important the company is properly incorporated and we can deal with this for you, if required. Our charges for setting up the RTE company and dealing with all necessary documentation (including filing documents with Companies House and HM Revenue and Customs, issuing the share certificates and completing all statutory registers), will depend on the number of participating leaseholders who are to become members of the company. Alternatively, you may wish to set up your own company.
Advice on the price to be offered for the freehold will be given by your valuer. Once this has been agreed between the participating leaseholders, we will prepare and serve on your freeholder a section 13 notice of claim which specifies the price you are prepared to offer. Your freeholder then has two months to respond by serving a counter-notice, which will include the price the freeholder is willing to accept.
In addition to the purchase price, you will also have to pay your freeholder’s valuer’s fees and certain of his legal costs.
Up to and including service of the section 13 notice, the work carried out by Gregsons will include:
- Receiving instructions, obtaining copy title documents, checking up-to-date details of your freeholder and carrying out a company search if necessary.
- Liaising with your valuer with regard to the purchase price to be paid for your freehold.
- Preparing the section 13 notice of claim and accompanying tenant information forms for each leaseholder, dealing with signature of the notice and effecting service on your freeholder and/or any agents or appointed solicitors.
- Making an application to the Land Registry to register the section 13 notice against your freeholder’s title in order to protect your interest.
- Dealing with all matters relating to the RTE company following its formation.
Once your freeholder has served his counter-notice, both parties’ valuers enter into negotiations to try and agree a purchase price which is acceptable to both parties. This is generally possible, but if agreement cannot be reached, then an application to the First-tier Tribunal (FTT) can be made by either party and the FTT will determine the purchase price.
An application to the FTT must be made within six months of the date of the counter-notice, otherwise your section 13 notice will be deemed withdrawn and you will be responsible for the freeholder’s legal and valuation costs incurred to the date of withdrawal.
During the period of negotiation and in the unlikely event the price cannot be agreed and it is necessary to make an application to the FTT (which is the exception rather than the rule), our charges will be calculated mainly by reference to the time spent on the matter.
Once the purchase price has been agreed, there is the additional conveyancing work required in agreeing the terms of the transfer of the property from your freeholder to the RTE company and dealing with completion and registration. This includes all HMRC stamping and Land Registry registration requirements.
Clearly one of the advantages in buying your freehold is that all of the participating leaseholders are then able to extend the term of their existing leases. This can be done by way of a deed of variation for each flat, rather than having to enter into a new lengthy lease. As a new extended lease is likely to enhance the value of your flat, this is likely to prove an excellent investment.
If a leaseholder has a mortgage, we will liaise with your lender because it will be necessary for an additional deed of substituted security to be entered into with your lender, which we will prepare. We will also deal with all HMRC and Land Registry requirements.
020 8946 1173