Buying a home is one of the most significant financial decisions a person can make. If you own a leasehold house, you may not realise that you have the opportunity to purchase the freehold, or you may wonder whether it would be worthwhile.
Enfranchisement – the legal process of buying the freehold – can offer significant financial, practical, and long-term advantages. The key benefits from a legal and practical perspective are explored below.
- Full Ownership and Greater Control
When you own a leasehold property, you technically own the right to live in the property for a set number of years, but the land itself belongs to the freeholder. Purchasing the freehold gives you outright ownership of both the property and the land it stands on.
This can have a number of advantages, including:
- removing the need to obtain permission from the freeholder for alterations or extensions to the property (although the usual Local Authority permissions would still apply);
- greater autonomy over how you use your property, for example, if you want to run a business from your home;
- freedom from restrictive lease covenants and conditions and from general landlord control and oversight.
In practical terms, you gain certainty, control, and long-term security over what is likely to be your most valuable asset.
- Elimination of Ground Rent
Leasehold homeowners are often required to pay annual ground rent to the freeholder. In some cases, ground rent can increase over time, especially if the lease includes escalation clauses.
By purchasing the freehold ground rent payments are eliminated, thereby reducing property related outgoings.
- Avoiding Lease Extension Costs
As the lease term shortens, the value of the property can decrease. Properties with fewer than 80 years remaining on the lease can become harder to sell or remortgage.
Buying the freehold removes concerns about lease length, eliminates the need (and associated costs) of future lease extensions and can also protect the future marketability of the property.
This is particularly important for homeowners planning to sell in the future.
- Increased Property Value
In many cases, a freehold house is more attractive to buyers than a leasehold property. Mortgage lenders also tend to prefer freehold properties because they present fewer legal complexities. As a result, your home may become easier to sell as it is generally accepted that freehold properties are more attractive to buyers.
- Long term Peace of Mind
Perhaps the most important benefit is security. Freehold ownership removes uncertainty as there is no diminishing lease term, no landlord, no lease restrictions to comply with. You own your home outright, permanently.
Is Purchasing the Freehold Right for You?
Not every leasehold property is the same. The premium payable will depend on:
- The remaining lease term.
- The level of ground rent.
- The property value.
- The terms of the lease.
While purchasing the freehold has many advantages, professional valuation advice is essential before proceeding from a surveyor or other suitably qualified professional.
Purchasing the freehold of a leasehold house can provide financial savings, increased property value, enhanced control, and long-term security. For many homeowners of leasehold houses, it represents an opportunity to take full ownership of their property and eliminate the limitations associated with leasehold arrangements. Certainly, in the right circumstances, buying the freehold of your leasehold house can be a highly beneficial move.
If you own a leasehold house and are interested in purchasing the freehold, please contact a member of our property team for further information.
