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Druces Private Wealth
Druces Private Wealth
Leaseholders, with long leases of houses, were given the right to the freehold of their property by the Leasehold Reform Act 1967. There have been a number of changes in this area of the law culminating in the Commonhold and Leasehold Reform Act 2002.
The main criteria are:-
• The property in question must be a house
• The house must be held under a long lease (i.e. one granted for more than 21 years)
• The house must have been owned by the leaseholder for more than two years, but there is no residency qualification: it is no longer necessary for the person exercising the right to have lived in the property.
The costs of acquiring the freehold depend on complex valuation formulae which are based on ground rent and yields and the length of the unexpired term. It is very important to be aware that for leases with less than 80 years left you may also have to pay what is known as a “marriage value” which can considerably increase the price.
To assist with this process it is strongly recommended to use a professional valuer. It is important (both for negotiations and before you serve the Notice on the landlord) to have an idea of how much you are likely to have to pay.
The leaseholder will have to pay the landlord’s reasonable professional costs, typically the solicitor’s and surveyor’s fees. This is in addition to their own professional fees and the usual third party payments which arise on any conveyancing transaction such as Stamp Duty Land Tax and Land Registry fees.
Part of the price you pay you will be the cost of buying out the ground rent and therefore this will no longer be payable going forwards. The law specifies which rights and other covenants contained in the lease will still apply to the freehold once it has been acquired.
In most cases, claims to enfranchise are resolved by negotiation between the valuers for each party. In those minority of cases where there is a dispute as to entitlement the matter can be referred to a county court or where the price cannot be agreed) to the First Tier Tribunal. This can be a lengthy and expensive process.
This guidance is necessarily general in nature and you should not act (or refrain from acting) without taking specialist advice on your particular circumstances.