Before any tenants can collectively agree to enfranchise they need an idea of the possible purchase price so it is advisable to have a valuation carried out by a surveyor.
The valuation will not give a precise estimate of the eventual price but the surveyor will be able to give a best and worst estimate from both landlord’s and tenants’ points of view and will be able to bring to bear local experience of values / prices . The Surveyor ought to be able to advise on anticipated areas where the landlord may counterclaim. In this way a range of values will be supplied so the tenants are aware from the outset of the anticipated ‘ball park figure’ of the price and can prepare accordingly.
In addition to the price the tenants should be aware of the liability for costs they will encounter. These will include professional advisers’ costs; mortgage/loan arrangement fees (if applicable); landlord’s reasonable costs (for which the tenants are responsible from the date of service of the Initial Notice).
There will also be fees for registration of the title at Land Registry (based on the actual price) and Stamp Duty Land Tax – calculated as a percentage of the price.
There may also be costs of obtaining estimates from contractors for potential repairs and maintenance depending on the state and condition of the building.
If you are buying your freehold collectively it is important to agree on this point prior to starting the process. You may wish to enter into a Participation Agreement to make sure all of you provide funds in the agreed proportions.
