London's 1.3 million leaseholders are shelling out £4.6bn in service charges every year as freeholders continue to hike their charges.
Many are now trapped in their flats unable to sell and unable to pay the charges.
According to Mike Somekh, who runs the Freehold Collective, the problem stems from the feudal system of land ownership which divides property ownership between those who own the land and those who have the right to occupy property on that land for a fixed period of time before it returns to the freeholder.
It means the landlord (also known as the freeholder) takes control of the upkeep of the building, the insurance and any repairs. They then make charges to cover their costs. The trouble is that in many cases the charges they pass on are over-inflated. Over that past five years, service charges have risen by over 40% and now average £3,600 in London with some leaseholders reporting increases of a staggering 500%.
Landlords, who have vested business interests in their property, receive hefty commissions from insurance companies, and from maintenance and repair contracts, where landlords decide upon the scope of works and the contractors used before recovering all costs from hapless leaseholders.
Mike Somekh, said: “Buying your freehold is the only way to gain control over the management of your home, save thousands of pounds and restore the value of your property.”
On average, a leasehold property is worth at least 5% less than the equivalent freehold property, he added.
There are many benefits from purchasing your freehold including:
- Benefit from 999 (perpetual) year lease extensions at no additional cost
- Remove all obligations to pay ground rent
- Make annual service charges more affordable and efficient
- Appoint your own management company and service providers, who report to you
- Grant yourself permissions and removing unhelpful restriction
- Grant yourself building rights on the freehold land
- Oversee the building's maintenance, insurance and servicing to a standard which better suits you
- Prioritise how your money is spent
- Take control and improve the value of your home and investment
Where to start
Before starting the process of buying your freehold, leaseholders and their building need to meet certain criteria.
- More than half of the leaseholders in the same building must show willingness to participate in purchasing the building's freehold.
- The building must contain at least two flats
- Less than 25% of the freehold building must be under a commercial lease, i.e: being used for non-residential purposes such as an office or shop
- At least two-thirds of all flats or apartments in the building must be owned by leaseholders with long leases (a long lease is one granted for more than 21 years)
- Anyone who owns three or more apartments in the same name does not qualify.
Once agreed, the group then becomes a collective who will need to purchase the freehold's premium.
Mike Somekh said:” The claim is nothing short of a compulsory purchase by the leaseholders of the freehold and the freeholder cannot refuse to sell, offering many benefits for leaseholders from control over their service charges to improved property values.”
The process can be complex and time-consuming but The Freehold Collective supports leaseholders in navigating through every stage.
