The differences between obtaining a lease extension or buying the freehold may seem a little bewildering at first, but the following basic guidelines below may help you choose which is right for you: –

A Lease Extension may be best for you if:

• Your lease is short – or about to get more expensive to extend (e.g. about to become less than 80 years remaining);
• You do not know your neighbours, do not get on with them, or would not want to be involved in running the freehold to your block with them;
• There is a high degree of ‘apathy’ within the block and you feel that you might be the only one doing all the work;
• There are a large number of flats (perhaps with non-resident owners) – and co-ordination and management of a freehold purchase claim might be difficult;
• You are generally ‘satisfied’ with the management of your block and do not want to take over the service charge budget.

You will not end up owning the freehold and taking ‘control’, but you will solve the problem of protecting the captial value of your flat.

If you are nearing a relevant valuation point (e.g. the lease length becoming less than 80 years) you will be able to ‘peg’ the valuation date by serving notice before the relevant date is passed, something that may be missed if you are waiting for a ‘collective’ action to take place.

You will need to have owned your property for 2 years before you can exercise this right, or if you are buying you will need to consider getting the outgoing owner to serve the notice (provided they qualify) and ‘selling this on’ to you.

Freehold Purchase (or “collective enfranchisement”) may be best for you if:

• You have concerns about future development of areas forming part of the block (e.g. the roof or other areas) – although it has to be remembered that the landlord can sometimes retain and develop common areas;
• You want to take ownership and control of the day-to-day management of the site;
• You have a well-organised group of residents (or a group of residents who are prepared to be organised);
• You want to protect the long-term capital value of your asset (which you can do by extending the lease to 999 years after the freehold purchase completes);
• There are other issues that can perhaps be addressed if the freehold is purchased (e.g. alteration of lease terms or correction of other defects in the title which may be possible with 100% participation);
• It is a small block and there is an equal choice for those involved as to whether to pursue the purchase of the freehold (with 100% participation) or lease extensions.

The overall results can be very rewarding – taking ownership and control of your building is a satisfying process. You will (collectively) be able to consider changing the management, or possibly to exploit other opportunities (e.g. the sale of lease extensions or shares in the freehold to non-participating owners, or the right to develop areas in a way decided by the residents).

If one of your concerns is the development or sale of other areas forming part of the block then this needs to be considered carefully, as the freeholder has certain rights to retain common areas and to grant the freehold purchasing company equivalent rights over them. Issues may also arise where a lease of an area capable of development or other use has already been granted, as this may well not be acquired as part of the process.

Curiously, with freehold purchase you do not need to have owned your property for any particular length of time to take part or initiate a collective action and therefore if you are in a small block (or looking to buy a flat in one) this may be worth considering.

Whatever you decide to do, ultimately you may require specialist advice as to the pros and cons as outlined above, to help you come to a decision.