Why should I buy my freehold?
A lot of people know a little about freehold and leasehold property, but very few fully understand the benefits of owning their own home outright. This articles serves as a very brief introduction as to why you should consider buying your freehold.
Increase the value of your property
Your property will be worth more if you own the freehold. This could just be a small increase if your property is on a long lease but the property will lose value as the lease length declines. You can stop this devaluation right now if you buy your freehold.
No ground rent , No development
You won’t pay ground rent or suffer from the freeholder’s development plans. Ground Rent is a legal but archaic and unjustifiable annual ‘tax’, often punishingly high and doubling every few years throughout the duration of your lease. Your freeholder can develop their property, for example by adding flats on the roof, granting themselves leases or charging for parking spaces. Freeholder’s legally profit from their property whilst leaseholders pay towards that profit and often gain nothing in return. Savings in buying your freehold can be significant.
Taking FULL control of the management
You can fully manage your own building without being beholden to the freeholder. Even if you already do so via an RTM or RMC, removing the freeholder has significant advantages and reduces many inherent hurdles and costs. Management might seem like a lot of work, but it doesn’t have to be. You would control which managing agent deals with the day to day running of the business, and therefore ensure that things are being done well and for a fair service charge. You are also allowed to carry out works on your property without needing to obtain permission from an external freeholder.
You own your own property!
Owning a leasehold property is only temporary. If the lease expires, the property is no longer yours and you get no compensation. You have rights over the common areas but cannot stop the freeholder developing his building. You have rights within your flat but still need to get the freeholder’s permission to do any non-trivial work. Owning a share of freehold puts you in charge of your building and your flat, which remains your property indefinitely.
There are hidden costs to NOT owning your freehold
Often overlooked, there are specific costs to not purchasing your freehold, both annually and when the time comes to sell. Ground rent is the the most obvious and when not in control of all the spending in relation to your property, leaseholders end up paying more in service charges. In this mature property market, buyers place a premium on flats with a share of freehold and expect to pay less for the same flat in the same building that is leasehold. If you own a leasehold house you are likely a victim of the leasehold house scandal. In all cases, your leasehold property is worth less than with a share of freehold often significantly. Being aware of these ‘hidden’ costs is critical.
These represent the main reasons to buy your freehold. However, a good question to ask is What are the reasons for NOT exercising my right to my freehold. This may be more illuminating.
Keep an eye out for further information! If you are interested in buying your freehold, please get in touch via our contact form.