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Buying the Freehold

QUESTION: I own one of 11 flats in a period conversion in Bristol. The leases run for 999 years, starting from about 25 years ago. We all pay an annual ground rent to the freeholder, who no longer lives at the property. I have looked after the day-to-day running of the building since the beginning, subject to a committee of other flat owners, and have discovered that the freehold may be coming up for sale. It has occurred to me that I could buy it myself. What are the probable costs involved, and are there any risks I should be aware of?

A freeholder cannot sell his interest in a property without first offering it to the tenants, which means you can't do a private deal. Typically, a letter is sent out to all the leaseholders, who then have two months to make up their minds whether or not to buy the freehold collectively.

The process of buying a freehold with other leaseholders is called collective enfranchisement. Strict conditions apply: there must be at least two flats in the building, two-thirds or more of which are leasehold; no more than a quarter of the floor space may be in non-residential use; and half the leaseholders must apply (both, if there are only two flats). If enough leaseholders agree, a company is set up to manage the freehold, and leaseholders given a share, which can then be transferred as and when they sell.

If the leaseholders fail to respond or reach a majority verdict, then the freeholder can sell to whomever he likes. A freehold is generally sold at auction and you would have to bid for it: being a leaseholder doesn't give you preferential status.

The good news is that, in the case of your block, the freehold will be relatively cheap: count on paying 15-20 times the total annual ground rent for the building, providing there is nothing else affecting the value, such as development potential that the freeholder could claim. You will also have to pay legal costs. For more advice contact Kelly & Co on info@kellyand.co.uk.

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