When you buy a property, you must pay careful attention to the type of ownership.
Freehold and leasehold are very different. So, it’s no sist some people want to switch between the two.
But how is this done? Why do people want to do it? And how much does it cost?
Read on to find out.
What is converting a leasehold to freehold?
Almost all properties in the UK are either one of the following ownership types:
- Leasehold means that property owners also own their property is built on. Responsibility for maintenance of the land is therefore up to you. This is commonly used with detached properties.
- Freehold means owners pay the land owner of their property a ground rent, and service charge for maintenance. It is most commonly used with flats
Converting from the former to the latter costs money. But it also comes with several advantages. We have explained these further below.
Using a Section 13 notice
You usually convert a leasehold into freehold using a ‘Section 13 notice’.
This notice outlines your intent to the freeholder to purchase the freehold of your property.
The freeholder might respond by agreeing immediately or asking 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 is typically needed – their expertise will be invaluable.
If negotiations fail, many experts recommend that you apply to the Leasehold Valuation Tribunal to find a fair price.
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 without needing permission from someone else. 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 are interested in 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.
How much does it cost to convert leasehold to freehold?
There are several legal procedures involved with converting a leasehold to a freehold.
You will need a qualified expert by your side. There are also extra costs that you may not have considered.
Some of the processes that involve payments include:
- Solicitors’ fees
- House valuation & survey fees
- Freeholder fees
- Stamp duty.
Your solicitors’ fees should cover small charges such as bank transfer fees and bankruptcy checks.
Several sources indicate that the average cost is around £6,000 for a ‘typical’ house valuation in the UK.
The number can vary based on your location in the UK. For example, a conversion in London will often cost more than an equivalent in Bradford.
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. But the best-case scenario, just three months is possible (this is extremely 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.
What if my freeholder is absent?
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. Get support from a solicitor in this process to ensure you do it correctly.
Do I need a solicitor to convert leasehold to freehold?
It is highly 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.
What to consider before switch switching from leasehold to freehold
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.
