Buying the Freehold of your building
In certain circumstances you will have the right to jointly buy the freehold of the building in which you live with all the other leaseholders who live there. As well as ownership being transferred to you, you also take on responsibility for the upkeep, insurance and management of the building. So you should think carefully about whether this is for you and whether you have the time and commitment to manage and run your building.
Qualifying to buy the freehold of your building
This is very complicated but here is a brief summary of the main conditions.
- There must be two or more flats in your building.
- At least two-thirds of the properties in the building must have been sold on long leases (leases with a term of over 21 years).
- A Right to Enfranchise (RTE) company (a private company limited by guarantee) must exercise the right to buy the freehold of the building. Its members must hold at least half the long leases on the flats in the building.
- Not more that 25% of the inside floor area should be in non-residential use, for example, a shop or office (this does not include shared stairs inside the building).
If there are tenants in the block
In these circumstances, we must take out a 999-year lease (otherwise known as a leaseback). In this way, we can continue our relationship with the tenants in the building while being a leaseholder rather than a freeholder.
If we have non-secure tenants (that is, those with an introductory tenancy), we can still choose to take a leaseback.
The costs of buying the freehold
The purchase price takes account of a number of factors and we work it out after the building has been valued. It will include:
- The open-market value of the building.
- At least half the marriage value (this is the extra value that results from the freehold and leasehold interests being under the same control).
- Compensation to your landlord for severance (this is added when the sale of a freehold lowers the value of the landlord’s other property) or other losses; and
- Your landlord’s reasonable costs.
Where can I get more information?
We recommend that anyone interested in buying the freehold of his or her building should get independent advice. The Department for Communities and Local Government (DCLG) has useful information which can be found at Leasehold flats - Your right to buy the freehold or renew your lease.
Other schemes that may allow you to buy the freehold
We run a scheme that allows leaseholders to buy the freehold of their building. You should apply if you qualify. The main conditions are that:
- All flats in the building must be sold on long leases; and
- All leaseholders must agree to the freehold being sold.
All service charges (annual and re-chargeable work under section 20) must be paid in full before the sale of the freehold is completed.