Owning a leasehold property has its perks, but it also comes with certain limitations and uncertainties. As a leaseholder, you essentially have the right to live in a property for a fixed period, subject to the terms of the lease agreement with the freeholder (also known as the landlord).
However, the leasehold system can be restrictive, as the property ultimately belongs to someone else. To overcome these limitations and gain true property ownership freedom, leaseholders often consider the option of buying their freehold.
In this article, we explore the concept of buying your freehold as a leaseholder, the advantages it brings, and the steps involved in this transformative process.
Understanding Leasehold and Freehold ownership
Before delving into the process of collectively buying the freehold, it’s essential to understand the basics of leasehold ownership.
Leasehold: In a leasehold arrangement, a leaseholder owns the right to occupy the property for a specific duration, typically between 99 to 999 years. The leaseholder may have to pay annual ground rent to the freeholder and must adhere to certain terms and conditions specified in the lease agreement.
While owning the property for the lease period, the leaseholder may face restrictions on modifications, subletting, and other property-related decisions.
However, when a resident management company (RMC) buys the freehold of a block of flats, it means that the individual leaseholders within the block of flats have collectively purchased the freehold of the entire building or estate in which their flats are located. This process is often referred to as “enfranchisement” or “leasehold enfranchisement.” The specific laws and procedures for enfranchisement can be complex so it’s essential for the leaseholders to follow the legal requirements and consult with legal professionals and property experts throughout the process.
By acquiring the freehold, the RMC takes over the ownership and management responsibilities that were previously held by the original freeholder. The leaseholders, now members of the RMC, gain more control over the decisions and management of the building, including the maintenance, repairs, and overall upkeep of common areas. However, this does not change the terms of the lease and those terms must still be adhered to.
If a resident management company (RMC) fails to uphold the terms of the lease, it can create various issues and potential legal consequences for both the RMC and the individual leaseholders.
The exact repercussions will depend on the severity and nature of the breach of the lease terms, but here are some potential outcomes:
Breach of Contract: The lease is a legally binding contract between the leaseholders and the RMC. If the RMC fails to meet its obligations as outlined in the lease, it could be considered a breach of contract. The affected leaseholders may have the right to take legal action against the RMC to seek remedies for the breach, such as obtaining a court order requiring the RMC to fulfil its obligations or claiming damages.
Loss of Trust and Confidence: Leaseholders rely on the RMC to manage the property and its common areas efficiently and responsibly. If the RMC fails to uphold the terms of the lease, it can lead to a loss of trust and confidence among the leaseholders.
This could result in internal conflicts and disputes among the residents.
Decreased Property Value: A poorly managed property can lead to a decline in its overall condition and appearance. This, in turn, may negatively impact the property’s value, making it harder for leaseholders to sell their flats or obtain fair prices if they decide to move.
Legal Action from Leaseholders: If leaseholders believe that the RMC’s negligence or mismanagement has caused financial losses or affected their quality of life, they may take legal action against the RMC to seek compensation for damages.
Potential Removal of the RMC: In severe cases of mismanagement or breach of lease terms, the leaseholders may have the option to remove the existing RMC and appoint a new management company through a democratic process.
Intervention by Regulatory Authorities: In some cases, there may be regulatory bodies or ombudsman services responsible for overseeing the management of leasehold properties. If complaints are raised against the RMC, these authorities may intervene, investigate, and potentially impose sanctions or penalties.
It is essential for both the RMC and the leaseholders to have a clear understanding of the responsibilities outlined in the lease agreement and to work collaboratively to ensure the proper management and maintenance of the property.
Regular communication, transparency, and adherence to legal and financial regulations can help prevent potential issues and maintain a harmonious living environment for all residents.
If disputes arise, seeking legal advice or mediation services may be necessary to resolve conflicts effectively.
