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When is the best time to purchase the freehold?
If you live in a relatively new block of flats with more than 80 years left on the lease, you need to purchase your freehold ASAP!
If your freehold is for sale - most likely through an auction - you need to reserve your rights and go on to purchase. This is by far the best and cheapest time to make that purchase!
What's the big deal about 80 years?
If you live in a leasehold property, most likely a flat, your lease will come with a term of years, most likely starting with 99 years when the lease was initially set up, the lease will then progressively decline. ′
| Of course at almost any point you have a legal right to extend your lease years, the greater the number of lease years, the lower the price of extending. |
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This is the start of the decline to 0 years when the property will ultimately revert to the ownership of the freeholder - it will no longer be your property!
The 80 year point is a particularly important part of this decline in lease years. It represents the point where any purchase of the freehold by the leaseholders must take into account more factors adding to the cost of purchase.
Reserving Your Rights - The Right of First Refusal
In almost any auction catalogue you will see associated with the sale of a freehold the comment
"Section 5(b) Notices under the Landlord & Tenant Act 1987 have been served and the Leaseholders have not reserved their rights under the legislation"
This is where the leaseholders have been served a notice under the Act and have not responded to reserve their rights. They have almost inavariably made a serious mistake!
In very brief summary, the landlord / freeholder writes to the leaseholders to say they are about to sell the freehold, the leaseholders then have the opportunity to state their interest in purchasing the freehold. There are various time frames associated with this. The leaseholders - there needs to be 50% or more in agreement, will appoint a representative (nominated person) to act for them.
With section 5B, all you are doing is reserving your right to buy at whatever price the freehold is bid up to at auction - it is not a commitment to purchase it!
If the freehold of your property comes up for auction and you have a right of first refusal, as soon as you get the letters refering to Section 5B, make sure you get at least 50% of your fellow leaseholders in agreement to reserve their rights. Now formally appoint a solicitor to work for you.
The timescales allow for confirmation and clarification at each point so you might choose to appoint a local solicitor. If somebody else is doing this, you must make sure that you and everybody else are kept informed of each stage of developments. This is a very important process.
By reserving your rights, any potential bidder will know that they are unlikely to end up with the freehold, the price will therefore most likely remain lower than had the rights not been reserved - good news for the leaseholder.
If the landlord / freeholder fails to give notice of first refusal they are committing a criminal offence! A criminal offence is one where the police act, rather than you having to take the matter to court! If you find the freehold has been sold or is about to be sold without providing you with any notice, all is not lost, click here for more information
- Section 5A - simple sale by contract, like selling a house
- Section 5B - sale by public auction - see above
- Section 5C - a grant of an option or right of pre-emption
- Section 5D - sale not pursuant to a contract
- Section 5E - sale for a non-monetary consideration
If you as a leaseholder are served a section 5B act now, you must reserve your rights!
Why do most intended freehold purchases not go through or even get started? Almost invariably due to the difficulty of getting everybody (the other leaseholders) together and agreeing a way forward and most importantly coming up with the funds!
Having reserved your rights you must now consider how to fund the purchase, that is where we come in. Contact us now!
Funding the purchase of the freehold
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