There are different types of property ownership.
The two most common are freeholds and leasehold.
These are very different. So, some homeowners switch between them.
But how is this done? Why do people want to do it? And how much does it cost?
Read on to find out.
Converting a leasehold to freehold
Almost all properties in the UK are either one of the following ownership types:
- Freehold means that property owners also own their property is on. They are responsible for maintenance of this land. This common with detached properties.
- Leasehold means property owners don’t own this land, they lease it. So, they pay the land owner ground rent and service charge for maintenance. It is most commonly used with flats.
Section 13 notice
You usually convert a leasehold into freehold using a ‘Section 13 notice’.
This outlines your intent to the freeholder to buy the freehold of your property.
The freeholder might agreeing immediately or ask to negotiate terms. If they refuse, then the matter can go to court.
Once you and the freeholder agree, you can proceed with the conversion. A solicitor’s expertise will be invaluable for this. They will help you gather and submit the right freehold documents, for example.
Negotiations might fail. If so, many experts recommend that you apply to the Leasehold Valuation Tribunal to find a fair price.
Costs for converting leasehold to freehold
There is no one-size-fits-all cost for converting a leasehold to freehold.
But there will be costs associated with:
- Solicitors’ fees: Including small charges such as bank transfer fees and bankruptcy checks
- House valuation: The average cost is around £6,000 in the UK
- Survey fees
- Freeholder fees
- Stamp duty.
These costs can vary based on the type of property you sell and your location.
How long does it take to convert leasehold to freehold?
Several sources state that the process can take up to one year.
It has even been known to take longer than 12 months. In the best-case scenario, three months is possible (this is rare though).
When you send a Section 13 notice to your freeholder, they usually have two months to respond.
This is before any negotiations take place. This is a common example of why the process takes so long.
The time taken is affected by the efficiency of everyone involved.
You and your freeholder should respond to requests for information as quickly as possible. Negotiating on price is also a major factor.
Reasons to convert a leasehold to a freehold
Long-term financial advantages
Freeholds can provide several financial advantages.
For example, they can help you avoid service charges and ground rent. You may also see the value of your property increase in the long term.
More control
You have greater freedom when you own a freehold property.
You can make changes to the property (as long as you have planning permission). This might include extensions, loft conversions, renovations, or more.
You will also be able to avoid restrictive terms in a leasehold contract.
For example, your previous freeholder may have prevented you from keeping a pet. You can get rid of this restriction by converting to a freehold.
Easier to sell
You may also find selling easier because more potential buyers want freehold properties. More viewings can also give you greater negotiating power.
And before you sell your freehold, you can update it to a 999-year lease with minimal costs. This makes your property a more attractive prospect to your potential buyers’ lenders.
Absent freeholders
If you have an absent freeholder, converting leasehold to freehold is more difficult.
You’ll need to send the freeholder a notice (often Section 13 or 42, depending on the circumstances).
But this is tricky if you don’t know where they live. You should then apply to the court for a ‘vesting order’. This can start the process of taking over the freehold.
Use a solicitor
It is recommended that you get support from a solicitor. You should only handle this process yourself if you are a qualified expert who has done it before.
Otherwise, you are likely to make mistakes or slow everything down. Getting a paid expert in the long run is often worth your money.
Considerations before switching
You should not convert a leasehold to freehold without considering certain factors first.
Sit down and work out whether you have the funds for this transition. Use the £6,000 figure listed above as a guideline.
But larger properties in more expensive areas will cost more. Speak to an expert for guide on the costs involved.
There is also time and effort required to maintain a freehold property. You can no longer rely on someone else to do it. This may involve extra costs for updates.
You will need to handle any disputes that arise. This could be about property conditions or extensions. Lease disputes may come up too in some form.
Ideally, you should determine how much value it will add to your property. And whether or not it will be worthwhile.
