Freehold Calculator | Costs Involved | HMRC


Curious about the value of your freehold? Well, look no further. This comprehensive guide to using our freehold calculator tool aims to help you estimate the cost of buying your freehold or extending your lease. Whether you are a freeholder, leaseholder, or part of a freehold collective, understanding the worth of your freehold can be the difference between a savvy financial decision and a costly mistake. The idea of purchasing the freehold of a house or a block of flats can seem daunting. But imagine the increase in your property’s value that could arise after you purchase the freehold. A freehold purchase calculator can help you determine how much this could be.

Our freehold calculator uses professional valuation principles like those of a Chartered Surveyor. It estimates the value of your freehold or the cost of a lease extension. In the context of a flat, the calculator will give you an estimated value of your share of the freehold. This tool can be particularly handy for those in a block of flats looking to purchase the freehold collectively. It allows you to estimate the cost of collective enfranchisement – a technical term for when leaseholders come together to purchase the freehold.

However, do bear in mind that the calculations are approximate. An RICS freehold valuation is required for a more accurate valuation, and It's always a good idea to seek professional or expert advice before deciding.

Freehold Purchase Calculator


The calculator above is only an estimation and it is only an accurate guide if the leases for the building are all the same. Where the leases are all differing lengths or have differing ground rents then please contact us for a more accurate valuation.

 

If you have any questions regarding collective enfranchisement or want to discuss your options with a qualified professional, call the experts at Harding Chartered Surveyors on 020 3598 6730. We’re more than happy to value your freehold at a time that’s convenient for you.

Freehold Valuation Quotation


How to Calculate the Value of Your Freehold


The premium provided by our freehold calculator should be used as a guide only. You shouldn’t use any figures provided by our calculator as evidence in court, nor should you assume the figures are 100% accurate without having your flat or building valued by a chartered surveyor. However, our calculator will give you a reliable approximate range estimate.

You need the following figures to use our freehold calculator:

  1. The current value of the freehold

  2. The annual ground rent

  3. The number of years remaining on the lease

Other variables that are required to determine the cost of collective enfranchisement include the expected increase in your property’s value as well as forecasted inflation and interest rates. Our calculator uses reasonable default values to give you an estimate, but only an RICS Chartered Surveyor can give you an accurate valuation.


Do I need to Pay Stamp Duty to HMRC?


When you buy a freehold property, one of the essential financial considerations is the Stamp Duty Land Tax (SDLT). This tax is levied on the purchase of homes and land, and its rate varies based on the property's price and your individual circumstances.

Key Points to Remember:

  1. Thresholds and Rates: If the cost of the freehold exceeds £250,000, you'll be required to pay stamp duty. The rate at which you pay SDLT ranges between 5-12% of the property's value, depending on its price bracket.

  2. Stamp Duty Calculator: To assist buyers in estimating their potential SDLT, many online platforms offer a Stamp Duty Calculator. This tool can provide a clearer picture of the exact amount you might owe.

  3. Second Home Surcharge: The rates mentioned are applicable for those owning a single home. However, if you're purchasing a second property or an additional home, there's an extra surcharge. In England and Northern Ireland, this additional rate is 3%. Meanwhile, in Wales and Scotland, buyers face a 4% surcharge.

  4. Exemptions and Reliefs: There are certain exemptions and reliefs available, especially for first-time buyers or specific property types. It's advisable to consult with a property solicitor or tax expert to understand if you qualify for any reductions.

While the process of buying a freehold can be exciting, it's crucial to be aware of all associated costs, including stamp duty. Proper planning and consultation can ensure a smooth transaction and help avoid any unexpected financial surprises.

What is the Ground Rent that a Leaseholder Pays?


Ground rent is a crucial component associated with leasehold properties in the United Kingdom. It represents a mandatory payment a leaseholder must pay to a property's freeholder or landlord.

In a leasehold scenario, the leaseholder acquires the right to inhabit a property for a stipulated period, as laid out in the lease. However, the land on which the property stands remains in the ownership of the freeholder. To compensate for this, the leaseholder must pay ground rent.

The value of ground rent and its payment schedule is outlined within the lease agreement. Ground rent can be a fixed sum or may increase over the lease term, as per the lease conditions.

The ground rent is often a nominal sum, which in traditional leases might be called a "peppercorn". However, certain modern leases may incorporate terms that significantly raise the ground rent over the lease's life. This could cause complications for leaseholders, particularly if they wish to mortgage or sell the property. To address this, the UK government has initiated reforms in leasehold law to ensure a more equitable system for leaseholders.

Freehold Calculator: Cost Factors


In addition to the size and location of your block or building, the price of purchasing your freehold largely depends on how many freeholders are involved, the number of flats in the building, the average length of time remaining on each lease and the potential added value of your building following the purchase. You also need to consider fees such as:

  • Marriage Value

The freeholder is legally entitled to 50% of the increase in value of your leasehold. Your flat’s value will inevitably rise after you purchase the freehold and extend the lease.

  • Compensation

If any of your landlord’s interests are adversely affected due to collective enfranchisements – such as if any of their remaining freeholds lose value – you may have to pay compensation.

The Leasehold Reform, Housing and Urban Development Act 1993

By law, leaseholders have a legal right to band together to purchase a share of their freehold, giving the current freeholder the boot. This process is called collective enfranchisement, which can be beneficial for multiple reasons.

By purchasing a share of your freehold, you can increase your flat’s value and assume responsibility for maintenance, which could reduce your service charges by hundreds of pounds every year. Moreover, you can usually extend your lease for up to 999 years free of charge and eliminate ground rent.

Generally speaking, the fewer years you have remaining on your lease, the more it will cost to purchase your freehold. There are also alternatives to collective enfranchisement that might be more affordable. Using this page's freehold purchase calculator, you can gauge the cost-benefit of purchasing your freehold.

Below, we’ll discuss some pros and cons of collective enfranchisement to help you decide the right path for your situation. We’ll also detail some crucial information and fees to familiarise yourself with.

How to Buy the Freehold

If you decide to purchase your freehold through collective enfranchisement, you can either reach an informal agreement with your landlord or follow the legal guidelines. If you choose formal negotiations, you must first serve your freeholder with an official notice containing your offer details. Your landlord/freeholder has a time limit to respond.

Don’t be surprised if your landlord disputes your offer. If they do, you’ll have a time limit to respond to the counteroffer. If you can’t reach an agreement, you can take your case to a Leasehold Valuation Tribunal, but be aware the costs can run into the thousands, and you may be liable to cover some or all of your landlord’s fees.

We highly recommend having your freehold valued by an RICS Chartered Surveyor before making an official offer. Doing so will give you a valuation that can be used as evidence if you need to appeal. First, you can estimate the costs of buying your freehold using our freehold purchase calculator. If you need any advice from a qualified expert, don’t hesitate to call us.

Should I Buy a Share of the Freehold?


Depending on your requirements, there are two alternatives to collective enfranchisement: you can either extend your lease or apply for the ‘right to manage’ your building. You’ll have to club with other leaseholders to take over your building’s management, and the same applies to collective enfranchisement.

If you want to add years to your lease, extending your lease might be a more affordable option than buying your freehold. If you’re considering collective enfranchisement to take over maintenance, you’re likely better off applying for the ‘right to manage,’ which you can often do for free besides the legal fees. 

Both lease extensions and collective enfranchisements become more expensive as the number of years remaining on your lease reduces. If you’re approaching the 80-year mark, you should seriously consider taking action sooner rather than later. If you already have less than 80 years remaining on your lease, you can buy the freehold (provided your fellow freeholders are willing to take part) and usually extend your lease for free.

Some studies suggest that those who own a freehold can generally sell their flat for more than those who only have a lease, assuming the two flats are almost identical. According to the estate agency Kinleigh Folkard & Hayward, most surveyors add one per cent to a flat’s value to benefit the freehold.

In short, the benefits of collective enfranchisement include:

  • You can usually extend your lease by up to 999 years for free. Legal fees may apply

  • Usually, you won’t need to continue paying ground rent

  • You can increase the value of your flat while making it more appealing to potential buyers

  • You can minimise service charges by choosing your providers instead of having to make do with those provided for you

  • You can take over your building’s maintenance – no more waiting around for slow landlords


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Expert Advice from Harding Chartered Surveyors


In conclusion, Harding Chartered Surveyors is a reliable and proven choice for individuals in London looking to purchase their Freehold. Their team of experienced professionals can guide you through the complex and often confusing process, providing clear and concise advice tailored to your specific circumstances. They have extensive knowledge of the Greater London property market, which ensures you get the best deal possible.

Should you wish to discuss your Freehold purchase in more detail or have any queries about the process, don't hesitate to contact Harding Chartered Surveyors. Their friendly and approachable team is ready and waiting to help. You can reach them directly on the phone at: 020 7736 2383, or alternatively, you can send your enquiries via email to: [email protected].

Embarking on a Freehold purchase in London doesn't need to be a stressful experience. With the expert guidance and support of Harding Chartered Surveyors, you can navigate this process with confidence and peace of mind.