Participating leasehold properties are purchasing an equal share of the company that purchases the entire developments freehold, as opposed to purchasing a direct share of their individual property based upon the size of their property.
The Section 5 Notice is an offer to purchase the freehold of The Residence (Stonehouse) Development in its entirety. Notwithstanding this, it is not possible to purchase induvial flat freeholds. It is also likely impossible to purchase individual house freeholds on this particular development. This is because all properties are accessed via private roads and/or shared communal spaces. All properties also have an equal entitlement to the enjoyment and use of these shared communal spaces.
If the shares were to be valued and apportioned on a ratio basis, a Chartered Surveyor would need to be appointed to ascertain a fair and reasonable method of calculation and all participating freeholders would need to agree with their valuation. Unfortunately, the Chartered surveyor and the additional legal fees associated with apportionments would be extortionate. The valuation process and achieving unanimous agreement would also be very time consuming.
Furthermore, participating leaseholders would still not own their own freeholds directly. The apportionment would only benefit the Chartered Surveyor and solicitors carrying out the additional work.
Leasehold properties purchasing a share of the freehold will still be bound by the terms of their lease. This is because the leases include important prohibitions, rights, restrictions and easements that regulate the legal relationship between the property owners, including how leaseholders can enjoy the development. This is irrespective of whether your property is 'leasehold' or a 'share of the freehold'.
Preliminary legal advice has suggested that at the point of purchasing the freehold it would be prudent to review all the leases and ensure that their terms remain fit for purpose.
In England and Wales, there are two main types of property: freehold and leasehold. If you own a freehold property, you own the property for an unlimited period, as well as the land it stands on and the airspace above it.
If you own a leasehold property, you own your part of the building, but (in the case of a flat) not the walls, or building the property is in. The length and terms of the lease were set by the freeholder when the property was constructed or converted. Once the lease expires, you will hand the keys back to the freeholder. Having a short lease or unfavourable terms can cause awful problems for leaseholders, such as difficulty getting a mortgage or problems selling the property. Some leaseholders trying to sell their homes on the Stonehouse Development have faced difficulties doing so in recent years.
You don’t have to buy a share of the freehold, but there are always advantages in doing so. If you are looking to sell or pass on your property at any point in the future and the lease has unfavourable terms, this could create problems.
Another reason it could be a good idea to purchase a share of the freehold is if you are unhappy with the amount of buildings insurance being charged or are paying an unreasonably high ground rent. Being the owner of a share of the freehold means you can remove high ground rents, manage the building the way you’d like, have the opportunity to choose your own buildings insurance and even improve your leases to make the terms fairer for you as leaseholders.
Due to differences in location, price and other factors, there are no fixed costs for a freehold acquisition. Generally, the amount you need to pay the freeholder should be lower for a freehold acquisition than a lease extension, and the benefits are far greater. Another factor that affects the cost is the number of leaseholders who take part in the freehold purchase. The more people take part, the lower the cost.
Purchasing a freehold can be very complex, with many different areas to keep track of. The process requires a lot of interaction with other companies and individuals, but if information is provided promptly by individual leaseholders the process can be very efficient. Via a Section 5 process (if you’ve received a notice), with no protracted litigation you could expect the entire process to be completed within about 4-8 months. Via the Section 13 process, without protracted negotiation, you could expect the process to complete within about a year. Of course, other external factors can affect the length of the process.
If you live in a block of flats that has little or no commercial space (e.g., a shop on the ground floor), then it is your absolute right to buy a share of your freehold. You will need to get at least 50% of your neighbours together to purchase. You cannot buy your individual freehold.