Over the course of the last few years, legislation has provided a right for leaseholders to buy the block of their flats, subject to certain conditions.
When it comes to the possibility of future development this can prove particularly lucrative and as most blocks experience a certain level of non-participation there is also the investment aspect of the freehold purchase that can benefit those who are involved.
It must be borne in mind therefore that the valuation of the freehold is only one aspect of the valuation that needs to be considered in these circumstances.
In essence, a company is formed to buy the freehold and this is similar to any other company. It will have a shareholding and once the freehold is acquired it will have an asset of value.
The shares therefore have value and this will depend on how much development potential the block may have and how much investment value there is in the unextended leases of those who choose not to participate.
If equal shareholdings are to be distributed to those that participate, the amount they are to gain from any automatic lease extensions also needs to be separately calculated.
For example, any individual with a 10 year unexpired term on their lease will have much more to gain from an extension to 999 years than would an identical flat in the same block but with a lease of 125 years unexpired.
The majority acquisition of the freehold is effected simply to gain control of the block but expert advice on these other aspects is essential to ensure that matters are dealt with correctly and that no individual loses out.