© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
What is the better option – freehold acquisition or lease extension? In principle, freehold acquisition makes sense since it gives more control of the property to the flat owners than lease extension alone and may add more value.
But the practicalities of a ‘collective’ enfranchisement can quickly bring flat owners and project managers down to earth. Often, when you ask flat owners who would like to join the board of the nominee purchaser company, you can hear a pin drop!
Then there is the issue of participation. To serve a Section 13 Notice, at least 50% of flats in a ‘building’ need to sign up. But, at this level, each participant will pay up to twice the cost of an equivalent lease extension. Special ‘gap’ funding of non-participants can be complex and lead to conflicts of interest. Freehold purchase can be even costlier the freeholder is compensated for lost development potential such as spare land, roof spaces or mobile phone mast sites.
An alternative is ‘bulk’ lease extensions (BLE), followed possibly by Right to Manage. Immediately the issue of participation level is removed; the BLE can go ahead with any number of flat owners. Acting together, they will have greater negotiating muscle and costsaving potential.
It may be even cheaper still if they can strike a deal with the freeholder informally. A negotiation ‘outside the Act’ is more likely than in freehold acquisition because the freeholder is not losing the goose that lays their golden eggs. A lower payment can result if owners agree an increase in ground rent and possibly an extension of less than the statutory 90 years. Also, owners under two years are not excluded.
With a little imagination and openness, any group of flat owners will be able to get the right result for their circumstances when they are presented with a straight freehold acquisition or BLE.
Case Study
Leasehold Solutions recently helped a block that had initially wanted freehold acquisition. However, a quantity surveyor from a neighbouring block with the same freeholder warned the group the negotiations had been difficult and suggested that BLE would help secure the value of their flats. In fact, the group was satisfied with the way the freeholder managed the development and had no issues with them. Of the 28 flats in the block with 67-year leases, 23 decided to take a lease extension as a group, doing so with little difficulty or hassle. With leases of 157 years each, almost overnight, by buying in bulk the flat owners increased the values of their properties by far more than they paid in cash.