For most people, the semi-feudal system of leasehold property is not ideal. It’s open to exploitation in a host of ways, but at the most fundamental level, the person paying the bill isn’t the customer.
Fortunately, under normal circumstances, you and your neighbours are allowed to rectify this odd situation by buying the shared freehold yourselves.
Why you might want to buy your shared freehold
Many freeholders also run property management companies, meaning that they are essentially their own client while someone else foots the bill. They have invested in the freehold with the express intention of turning a profit, so there are powerful motivations for them to maximise expenditure, and you can’t change providers if you’re unhappy with the service. By buying the shared freehold, you can appoint your own agent (or self-manage), normalising the client-provider relationship.
Buying the freehold can also affect the value of a flat, especially if the lease hasn’t got all that long left to run. Extending your lease normally doesn’t cost anything if you own a share of the freehold, but it can be costly if you don’t, and a short lease can drive down the price of your property.
Why you might not want to buy your shared freehold
Some properties, particularly larger ones, might be better off with a detached and assertive freeholder-manager. If you take on the shared freehold, you will have to deal with your neighbours, and they might be much more trouble than the current freeholder. What happens if you want something repairing and the rest refuse? And how will you deal with non-payers? When conflict arises (almost inevitably) how will you deal with it? A good managing agent will make life a lot easier, but whichever way you look at it, more control is likely to mean more work, and you might not want that.
Buying a shared freehold is supposed to be simple, but it often isn’t. On top of your share of the freehold price, you’ll need to budget for legal and surveyors’ fees, and an obstructive freeholder can drag the process out for a long time. You’ll need to be up for a scrap if necessary.
It’s also worth trying to be honest with yourself about just how bad the status quo really is. It’s easy to dislike freeholder-managers when they’re always tapping you for money and sending you curt letters, but many are very competent and conscientious in an enormously complicated role. They’re usually dealing with multiple properties – and varied leases – and for every leaseholder who pays their bills on time, there’s another who doesn’t. Regular maintenance work, though sometimes apparently unnecessary, will usually save money in the long run, and while using affiliated contractors might seem dodgy, it might also make good financial sense.
Alternatives to buying your shared freehold
There are several options for unhappy leaseholders, but your first course of action should always be to try talking through any issues with your current managing agent. Email correspondence is easily misinterpreted on both sides, so get them on the phone and ask for any important points in writing afterwards. Good agents will also have a proper complaints process in place.
If you’re still not happy, then obtaining your right to manage is another option. This is cheaper than buying the shared freehold, and gives you many of the same powers, including the ability to appoint your own independent manager.
If you don’t want more control over the management of your flat, but are more concerned by the fact that your lease hasn’t got many years left on it, you might want to buy a lease extension instead.
Ways to buy your freehold
Sometimes the freehold comes on the market of its own accord (particularly if your freeholder has recently taken a battering at the First Tier Tribunal), and it must be offered to the leaseholders first. This is called the right of first refusal, and you’ll need the majority of the leaseholders in the building on board if you want to take it up. Freeholders can propose whatever price and terms they like, but they can’t subsequently offer a better deal on the open market.
The other option is called collective enfranchisement, and this is where you force the freeholder to sell you the shared freehold at a fair price. There are qualifying conditions, but most properties are eligible, and you don’t have to prove any wrongdoing.
Collective enfranchisement is relatively expensive, and takes time. The purchase price of the freehold itself is based on a complicated set of rules, and you’ll need to employ experienced solicitors and surveyors too. Alarmingly (but fairly) you’ll also need to pay the freeholder’s professional and legal costs, and they’re not likely to take much trouble to keep these down.
If you’re seriously considering collective enfranchisement, then your first stop should be the relevant information on the Leasehold Advisory Service website. Despite the cost and complication, it’s a process that ultimately allows you to take control over your most valuable material asset.