In a few years' time it should all be much simpler. Banks and building societies are employing lawyers to come up with a straightforward package that can be sold over the counter like any other. For those entangled in the process of buying their freeholds, it won't come a moment too soon.
The leasehold enfranchisement process is as clumsy as its name. Since it came into effect on 1 November last year, not a single person or group has successfully used it to buy out their landlord. Plenty have served notice that they intend to do so, but that is just the first official shot in a protracted war.
No one really knows the value of most freeholds. That will not become clear until a number of cases have been seen by the Leasehold Valuation Tribunal - the panel that will adjudicate in disputes between freeholders and leaseholders. Some crucial points of the Act are likely to go right up to the Law Lords for final interpretation.
Nor does anyone know how high the professional fees will be of the agents, lawyers and surveyors you need to make your case. Even the professionals themselves don't know. Clare Berry of Savills' Knightsbridge office, which handles many leasehold sales, said: 'It is a minefield. Until some test cases have come through, we are all working in the dark. The question people ask is, 'What is this going to cost me?' The answer is, 'We don't know.' '
A few guinea-pigs are required. Alison Steinmetz may turn out to be one of them. Miss Steinmetz lives in Tooting Bec, south London, in a house converted into five flats. She and her neighbours want to buy out their landlord, following a history of disagreements over the standard of maintenance and repair work done to the property. They are just the kind of people the new law is supposed to help.
They took advice from a solicitor and a surveyor who suggested the freehold of their house was probably worth between pounds 1,500 and pounds 2,000. Armed with this information Miss Steinmetz went to the landlord to try to reach an agreement privately. The landlord, Sinclair Garden Investments of Bognor Regis, valued the freehold at pounds 9,000. Battle has duly commenced.
The Tooting Bec group can ask their own professionals for a fee guide. But they have no control over the landlord's fees, which they will also be obliged to pay. Already the landlord has said it will not be using the normal local surveyor but the central London firm of Allsop & Co, whose valuation fee is pounds 1,600 compared with Miss Steinmetz's quote of pounds 300.
When she approached her building society to ask whether the leaseholders would be allowed to add the cost of buying the lease to their mortgages, Miss Steinmetz met with a very negative response. If any of them had negative equity (which is concentrated in flats in the South-east) the society wouldn't consider it. Even if they did not, it was not convinced that the value of the property would go up enough to cover the loan.
Miss Steinmetz has a full-time job and other things to do in her life apart from attempting to buy out her landlord. She has been engrossed in this process since the legislation was first mooted, and yet, more than a year later, she has taken just one small step forward.
Anthony Griffiths, Savills' director of residential valuations, has advised a number of leaseholders about how to buy out their freehold. He urges them to try very hard to secure a private agreement with the landlord.
If that fails, they will need energy, commitment and good humour to see the process through to the bitter end. 'You have to beware a situation in which people simply end up transferring the venom from the landlord to each other,' he said.
What groups such as the Tooting Bec five require is a package covering the following: professional advice from a well-informed solicitor and a surveyor; a scheme to set up a company in which all the leaseholders have shares and which is the vehicle used to buy the freehold; a loan made to this company to cover all enfranchisement costs, which subsequently goes on the service charge; and someone to hold their hands.
Ron Armstrong, the director of legal services at the Council of Mortgage Lenders, thinks there will be packages of this kind in the not too distant future. The key feature for the lender would be to make the loan to the company buying the freehold, rather than to the individual leaseholders. If the company failed to pay, the lender would have the freehold as security and could in effect become the new landlord.
'It would make funding a great deal easier,' Mr Armstrong said. 'The problem is, this is a brand new concept and it has come in at a time when lenders have a recent history of problems. People are nervous of being the first to dip their toes in the water.'
Flat-dwellers are mainly young people in their first home or old people in their last one. The first group tend to move on quickly. They will immerse themselves in this process only if their flat lease is becoming too short or their landlord is truly unbearable.
Even then they are more likely to opt to extend their lease than to buy it out. They don't want the hassle of running their building; they simply want to secure their investment.
The older owner is in a different position. He or she may have more time and more capital to see the enfranchisement process through. Some observers expect the first successful cases to come from among their ranks.
Even if they have no intention of using the new Act, all leaseholders would be well advised to find out how it relates to their property. When the time comes to sell, your prospective buyers will want to know whether the lease can be extended or bought and what the landlord's attitude is. This is one area where your local estate agent may not be best placed to advise you.
The British are notoriously loath to pay for professional services, but this is a case where it could save a lot of money and heartache. A couple of hours of expertise from one of the big London firms such as Savills is likely to cost you about pounds 250, but could save you thousands of pounds.
The original intention of the Leasehold Reform Act was to help flat owners to sort out a diminishing asset or a bad landlord. Those intentions are unlikely to be met until the big financial institutions step in. For the time being leasehold enfranchisement is strictly for the brave.Reuse content