freehold purchase
📖 What is freehold purchase? Meaning and definition
A freehold purchase allows a leaseholder to acquire the 'freehold interest' of their property, which means they gain full ownership, removing the lease and the landlord-tenant relationship. This process is often initiated under specific legislation, such as the Leasehold Reform Act 1967, which grants eligible leaseholders the 'right to buy' the freehold. The price for this purchase, known as the 'freehold purchase premium', is determined through a valuation process, which may involve tribunals if the parties cannot agree.
When a leaseholder applies to buy the freehold, the price is calculated based on various factors, including the 'entirety value' of the property and an 'apportioned site value'. The tribunal may adjust these values based on specific property characteristics, such as an end-of-terrace location or adjacent parking. If the respondent (the current freeholder) fails to engage with the process, the tribunal can determine the price based solely on the applicant's submissions and evidence.
Once the tribunal determines the premium, the matter is typically returned to the County Court for the final legal procedures to be completed. This ensures that the determined price is paid and the transfer of the freehold interest can proceed. The goal is to convert a leasehold property into a freehold property, giving the former leaseholder complete control and ownership.
📋 Requirements
- An application notice must be submitted by the leaseholder to initiate the process.
- The purchase price, or 'premium', for the freehold interest must be determined.
- The process may involve a tribunal to set the price if parties cannot agree or if the freeholder fails to respond.
- The valuation considers factors like the property's entirety value and apportioned site value.
- The matter is returned to the County Court for final procedures after the premium is determined.
📝 Procedure
- The leaseholder submits an application notice, often following a 'Notice of Enfranchisement'.
- The freeholder (respondent) is expected to respond to the notice and comply with tribunal directions.
- If the freeholder fails to respond, the tribunal may determine the application based on the leaseholder's evidence.
- The tribunal calculates the 'freehold purchase premium' based on valuation parameters and property specifics.
- The determined premium is then paid by the leaseholder.
- The case is returned to the County Court for the final legal steps to complete the freehold transfer.
💡 Examples
- A leaseholder of a house at a specific address applied to the First-tier Tribunal to determine the price for buying the freehold interest after the freeholder failed to respond to their notice.
- The tribunal determined a freehold purchase premium of £2,086 for a property, taking into account an adjusted 'entirety value' and an apportioned site value of 37.5%.
- For a property with an end-of-terrace location and adjacent parking, the tribunal applied a 5% uplift to the standing house value, resulting in a freehold purchase premium of £2,485.
- A leaseholder successfully purchased the freehold interest in their property, with the tribunal setting the price at £272.95 and a pecuniary rent of £90.00, under the Leasehold Reform Act 1967.
📚 Legal basis
- Leasehold Reform Act 1967
- Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013
❓ Frequently asked questions
What does 'freehold interest' mean in a freehold purchase?
The 'freehold interest' refers to the absolute ownership of both the land and any buildings on it, without a time limit. When you purchase the freehold, you acquire this full ownership from your landlord.
How is the price for a freehold purchase determined?
The price, called the 'freehold purchase premium', is determined through a valuation process. This often involves assessing the 'entirety value' of the property and an 'apportioned site value', with tribunals making adjustments for specific property features.
What happens if the freeholder doesn't respond to my application?
If the freeholder (respondent) fails to respond to your 'Notice of Enfranchisement' or comply with tribunal directions, the tribunal can proceed to determine the purchase price based solely on your submissions and evidence.
Which law allows me to buy my freehold?
The Leasehold Reform Act 1967 is specifically mentioned in the cases as the legislation under which leaseholders can apply for the right to buy their freehold interest.
What is the role of the County Court in a freehold purchase?
After the tribunal determines the premium to be paid, the matter is typically returned to the County Court for the final legal procedures to take place, ensuring the transfer of ownership is legally completed.
Can property features affect the freehold purchase price?
Yes, specific property features can influence the valuation. For example, an end-of-terrace location with adjacent parking was noted in one case as leading to a 5% uplift in the property's value, affecting the premium.