Is it Worth Buying the Freehold of a Flat? The Experts Opinion
The honest answer is: often, yes. And a real case shows why.
One case, in East Ham, London, a converted terraced house split into two flats, each on a 99-year lease from 1997 with a ground rent rising in stages from £20 to £25 to £30 a year. By 2020, when the two leaseholders applied to purchase the freehold collectively, only about 53 years remained on each lease.
That 53 year mark is the danger zone twice over. Below 80 years unexpired, marriage value kicks in (the freeholder is entitled to half the value released by extending the lease), and the premium only climbs as the years pass. Below roughly 70 years, most mainstream mortgage lenders decline outright, which means both flats were already sliding toward being unsellable to anyone needing a standard mortgage.
The Tribunal set the collective enfranchisement premium at £61,200, about £30,600 per flat once marriage value, ground rent, and reversion were all factored in. That’s a real cost. But it converted each shrinking, increasingly unmortgageable 53 year lease into a 999 year share of freehold, stopping the marriage value clock, restoring full mortgageability, and protecting resale value that would otherwise have kept eroding every year the leaseholders waited.
Here, the case for buying wasn’t practical or sentimental. The lease term, the ground rent, and the mortgage lending thresholds all pointed the same direction: buy now, or pay more later for a flat that’s harder to sell in the meantime.
This case shows why buying can pay off, when the lease term, ground rent, and mortgage thresholds all point the same way. But not every building looks like this one. The next question is how to tell which situation you’re in, and that starts with knowing whether you’re even eligible to buy.
What Does it Mean to Buy Your Freehold?
Buying the freehold of an apartment block means that the residents will collectively own the building outright, rather than continuing to rent a long leasehold flat from a landlord.
This is often done through a process called collective enfranchisement, where the tenants of a building come together to collectively purchase the freehold from the current owner. To buy the freehold of a flat by collective enfranchisement, you will need to get the support of at least 50% of the other leasehold owners in your building and ensure that you are qualifying tenants.
Once you have the support of the majority of leaseholders, you can register your collective enfranchisement and start the process of buying your freehold together. By doing this, you will own a share of the freehold, along with the other flat owners involved in the process.
This can be a lengthy and complicated process, so we recommend working with a freehold purchase agent to make sure the whole thing goes off without a hitch. Once you collectively own your freehold, you will have more control over your building and how it runs.
As collective owners of the freehold, you will take on the responsibilities of a freeholder, which include:
- Maintaining the building and common areas.
- Collecting service charges and maintenance costs from tenants.
- Paying legal fees and buildings insurance.
- Dealing with any planning permission or redevelopment applications.
Eligibility Requirements for Buying Your Freehold
To qualify for a freehold purchase, the eligibility requirements are:
- The building must contain at least two flats or apartments.
- No more than 25% of the freehold building can be being used for commercial or non-residential purposes, i.e. offices or shops.
- Two-thirds of all flats or apartments in the building must be owned by leaseholders with long leases.
- Half of all flats or apartments in the building must be owned by leaseholders willing to purchase a share of the freehold.
If your building meets all of the above criteria, then you should be able to buy the freehold through collective enfranchisement, with the value of the freehold being determined by a specialist surveyor.
I’m Eligible: Should I Buy the Freehold?
This is the most important question in this guide. Eligibility means you have the right. It does not mean the investment is justified.
This is the most important question in this guide. Eligibility means you have the right. It does not mean the investment is justified. A scenario like the one above illustrates when the investment may not be: long lease, low ground rent, no management problem, high premium relative to any realistic benefit. The checklist below identifies when the investment is justified and when it is not.
When buying the freehold is likely to be worth it:
- Your lease is below 100 years: below 100 years the premium for a lease extension rises significantly, and below 80 years marriage value is added. Enfranchisement addresses this permanently.
- Your ground rent is above £250 per year: lenders will not mortgage properties above this threshold. Enfranchisement eliminates the ground rent entirely.
- You have a management dispute: if service charges are inflated or maintenance is neglected, enfranchisement transfers control to the leaseholders.
- The premium is proportionate: TFC assesses whether the total investment (premium plus fees) has a realistic payback period given the annual savings from enfranchisement.
When buying the freehold may not be worth it:
- Leases are already very long (999 years or recently extended): the risk that enfranchisement addresses has already been removed.
- Ground rent is low and below the mortgage threshold: no practical benefit from elimination.
- There is no management problem: service charges are reasonable and the freeholder is co-operative.
- The premium is disproportionate: in some buildings, the freehold value is high relative to the number of flats, meaning the per-flat investment exceeds any foreseeable benefit.
What are the Benefits of Buying the Freehold?
There are many benefits that come with owning the freehold of your building, such as:
- You will have control over how your building is run, maintained and managed.
- You will not have to pay ground rent to a landlord.
- You will take control of the freehold from the current owner, which means you will have more say in any future redevelopment plans.
- The value of your flat is likely to increase as a result of owning the freehold.
How Much Is the Purchase Price for a Freehold?
The purchase price for a freehold will vary depending on a number of factors, such as the size of the building and its location. You can expect to pay anything from £5,000 to £50,000 for a freehold, with the average price being around £15,000.
If you want a more accurate estimate of your freehold costs, you can use our Freehold Purchase Calculator. Simply enter in a few details about your building and we will give you an instant estimation of the value of your freehold.
Other Options: Right to Manage?
If you are not looking to purchase the freehold of your building, there are still other options available to you for taking control of how your property is run. One option is to set up a Right to Manage (RTM) company, which gives leaseholders the power to manage their building without having to buy the share of a freehold.
This option can make a great alternative if you are not looking to take on all of the responsibilities that come with owning the freehold, or if you cannot afford the purchase price.
Final Thoughts
Purchasing the freehold of your building can be a great way to take control of your property and add value to it in the long run. But as the example above shows, it is not always the right answer.