Is It Worth Buying the Freehold of My House

Buying the freehold of your house can be a valuable long-term investment, especially if you currently own a leasehold property. It gives you full ownership of the land and the building, removing the limitations and costs associated with leasehold tenure. Whether it is worth doing depends on your circumstances, the cost of the freehold, and how long is left on your lease.

In England and Wales, houses can be sold as either freehold or leasehold. Freehold ownership means you own the property and the land it stands on outright. Leasehold means you have the right to occupy the property for a fixed number of years, but you do not own the land or the structure. Flats are usually leasehold, while houses are commonly freehold. However, in some developments, especially newer estates, houses may be sold on a leasehold basis.

What Freehold Ownership Means

If you buy the freehold, you become the legal owner of the property and the land indefinitely. You are not subject to ground rent, lease extensions or the approval of a freeholder for alterations. You will no longer have to pay administration fees for things like changing mortgage lenders or making structural changes, which are common frustrations for leasehold house owners.

It also gives you control over the management and maintenance of your home without interference. This can be particularly appealing if your freeholder is slow to respond or imposes excessive charges.

When It Makes Sense Financially

Buying the freehold usually makes the most sense when your lease is getting shorter, typically below 85 years. As a lease gets shorter, the property can become harder to mortgage and sell. Extending a lease can be expensive, particularly once it drops below 80 years, when marriage value must be paid to the freeholder. Buying the freehold avoids this and protects the value of your property.

In some cases, buying the freehold can increase the property’s market appeal and value, especially for prospective buyers who are put off by leasehold restrictions. If ground rent is high or set to increase, purchasing the freehold can also lead to long-term savings.

The Legal Process and Eligibility

To buy the freehold, you must usually meet eligibility criteria under the Leasehold Reform Act 1967. This typically applies to houses that are let on a long lease and meet certain occupation and ownership conditions. The process begins with serving a formal notice of your intention to buy, after which the freeholder can either accept your offer or negotiate a premium.

You may also be able to purchase the freehold through informal agreement with your freeholder, which can be quicker but may lack the protections of the statutory route. Either way, you will need a solicitor and may wish to instruct a surveyor to value the freehold interest accurately.

Costs Involved in Buying the Freehold

The cost of buying the freehold varies based on the property’s value, the length of the remaining lease, and the amount of ground rent. Other factors such as development potential or location can also influence the price. In addition to the premium, you will need to cover your own legal and valuation fees, and in statutory claims, the reasonable costs of the freeholder’s professional advice as well.

While the initial outlay can be significant, many homeowners view it as a worthwhile investment in future control and peace of mind. The sooner you act, the lower the cost is likely to be.

Risks and Considerations

It is important to weigh the benefits against the financial and legal implications. If the cost of the freehold is very high relative to the value of your home, or if you are not planning to stay long term, it may not make economic sense. Similarly, if your lease has more than 100 years remaining and your ground rent is low or peppercorn, the advantages of owning the freehold may be minimal.

Not all leaseholders have a right to buy the freehold. In mixed-use buildings or shared estates, complexities such as management companies or estate charges may still apply even after purchasing the freehold.

Conclusion

Buying the freehold of your house gives you greater freedom, long-term security and often increased property value. It eliminates ongoing costs like ground rent and reduces your reliance on a freeholder. For many leasehold house owners, it is a sensible investment, particularly when the lease is beginning to shorten. However, the decision depends on cost, lease length and your personal plans. Professional advice is always recommended to ensure you make an informed and financially sound choice.