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Leasehold enfranchisement

The Leasehold Reform, Housing and Urban Development Act 1993 gives leaseholders – also known as the tenants – the right to join forces to buy the freehold of their building. Collective enfranchisement gives tenants more control over the management of their building, compared to traditional leases where the freeholder – also known as the landlord – is responsible for managing the property.

If you are looking to apply for collective enfranchisement, speak to a member of our specialist team. Our recognised and recommended regional firm takes pride in its work and in delivering the highest standard of service, by building strong working partnerships based on trust, efficiency and excellent communication.

Key things for leaseholders to consider

  • Collective enfranchisement gives leaseholders a legal right to join together to buy the freehold of their building.
  • The right to enfranchise is dependent on the number of qualifying and participating leaseholders.
  • Leaseholders who want more control over their can also apply with other leaseholders for the ‘right to manage’ their building.
  • If you’re a leaseholder, view our FAQs >

If you’re a freeholder, see our handy guide >

We advise on lease enfranchisement, for both leaseholders and freeholders. Our recognised and recommended regional firm has a multi-disciplined team that takes pride in its work and in delivering the highest standard of service by building strong working partnerships based on trust, efficiency and excellent communication.

We have an experienced team of RICS registered valuers specialising in valuations for lease enfranchisement who operate throughout London, Buckinghamshire, Berkshire, Surrey, Hampshire, Oxfordshire and Hertfordshire.

For guidance on your individual options, please contact us.
Fill in our simple enquiry form or call us on 01628 771221

 

A guide for leaseholders

Organising a collective enfranchisement can be a complex process, so it’s important that you meet the right requirements and receive professional advice. We’ve covered the most frequently asked questions below, to help you gain a better understanding of the process.

 


 

FAQs for leaseholders

Collective enfranchisement gives leaseholders a legal right to join together to buy the freehold of their building. This is enabled by The Leasehold Reform, Housing and Urban Development Act 1993.

Buying the freehold gives the leaseholders control over their building. They can appoint their own managing agents, or manage the property themselves. We often hear from leaseholders not satisfied with the way their block is managed by the freeholder (we also hear of very proactive freeholders!).

There is also peace of mind in being part of a tenant-owned building, and this is usually a good selling point for buyers. It provides leaseholders some form of control over the block which can be appealing.

The right to enfranchise is dependent on the number of qualifying and participating leaseholders. The principle requirements are as follows:

  • The building must be a self-contained block, with a minimum of two flats
  • The building must have no more than 25% non-residential use, and two thirds of the flats must be held by qualifying tenants
  • At least 50% of all the leaseholders in the building must participate
  • Each participating leaseholder must have a long lease – with an original term of at least 21 years or with a right to renewal

Unlike individual lease extension or enfranchisement of a leasehold house, there is no requirement to have a minimum period of ownership.

The price depends on several variables, such as:

  • The value of the flats
  • The ground rent provision for each flat
  • The length of the current leases – especially if any flats have less than 80 years remaining
  • Whether there is any development potential at the property that the freeholder will lose
  • Are there parts of the property not owned by the leaseholders that they will acquire during the process that may add value – such as loft spaces or basements

You will need a specialist surveyor to undertake a valuation of the property and premium payable and a specialist solicitor to deal with the legal issues.

Other costs to factor in include:

  • Legal fees – the cost of hiring a solicitor.
  • Valuation fees – the cost of the surveyor’s report.
  • Stamp duty – this applies to enfranchisement in the same way as any other home purchase.
  • The freeholder’s fees – you’ll need to cover the freeholder’s “reasonable” legal costs and valuation fees. Importantly, this does not include the freeholders’ costs for negotiating.
  • Talk to the other flat owners. At least 50% of the tenants need to participate to qualify for collective enfranchisement. Some very large blocks will appoint a representative to handle this task.
  • Find a solicitor. The Leasehold Advisory Service and the Association of Leasehold Enfranchisement Practitioners have lists of solicitors who are specialists in collective enfranchisement. Costs can vary so it’s important to do your research beforehand – check whether the fee is fixed or an estimate.
  • Value the freehold. You will need a surveyor to value your property and determine the likely premium. The cost of the valuation can vary depending on the size and value of the block. Call Kempton Carr Croft in order to receive a formal quote.
  • Set up a company or a trust. You will need a nominee purchaser who will buy the freehold. This can be a person or group of people, but it’s usually a limited company set up by the group of leaseholders. Your solicitor can help with all of this – Companies House provides advice on starting and running a company.
  • Initiate negotiations. Once you have read your surveyor’s report, you can start negotiating with your landlord. This can be done informally through written correspondence, but it is recommended to negotiate formally by sending a “tenant’s notice of claim” to the landlord. Every participating leaseholder must sign this notice.
  • Your landlord will then serve a Counter Notice, which will include their counter offer premium proposal. This must be done within two months from the date you served your initial notice.
  • Once the Counter Notice has been served, negotiations will take place between the surveyors of the two parties. If all goes well and both parties can agree on the premium, the new lease form will be agreed by the solicitors and completed.
  • If the surveyors are unable to agree on a premium, you can apply to the First-Tier Tribunal to have the matter settled. The application must be made within six months of when the freeholder’s counter notice was due. Once you apply, you will be notified of the hearing date and timescales for producing reports. Your surveyor and solicitor will work together in order to submit any reports and attend the tribunal on your behalf, if necessary. The Tribunal will then consider both parties’ evidence and determine the premium.

Your lease will be extended by 90 years on top of the remaining term. For example, if you have 70 years left on your lease, you will be given a new lease of 160 years.

Although there is no legal requirement to do so, we would always recommend this unless the block has fewer than four participants. This is because only four names can be registered at the Land Registry as the freeholder. To avoid disputes over who becomes a trustee or beneficiary, forming a company means that all participating individuals can become shareholders or members.

On average the process could take between six to twelve months, but this could be longer if an agreement cannot be met between you and the freeholder.

You will need about two to three months to obtain legal advice and a valuation, and to report back to the other residents, then to organise yourselves to be in a position to go forward with the claim. If the freeholder is prepared to co-operate, then the claim can be concluded quickly – usually within three months of the Counter Notice being served.

 

Get in touch today to discuss your individual options >

 

FAQs for freeholders

The leaseholders of a single block of flats have a legal right to collectively buy the freehold of their building, enabled by The Leasehold Reform, Housing & Urban Development Act 1993. If at least 50% of the leaseholders in the building participate, then the freeholder cannot refuse them the sale of the freehold.

Once the initial Notice of Claim has been served on the freeholder, they have a period of 21 days from which to request evidence of the participating tenants’ title to their building and period of ownership. The freeholder also holds the right to inspect the tenants’ properties, subject to 10 days’ notice given to the occupiers. If this is not supplied by the leaseholder within 21 days then the “tenant’s notice of claim” can be withdrawn, and the leaseholders must pay costs incurred, to the landlord.

The freeholder will then have to issue a Counter Notice including their counter offer premium proposal.

If a freeholder owns a property where two-thirds of the leases in the building have a lease of less than 5 years from the service date of the notice, then they can claim the right of redevelopment against the leaseholders’ request for enfranchisement. In this circumstance, the landlord must prove indefinitely that he intends to demolish and redevelop the building, therefore voiding the nominee purchasers’ enfranchisement claim.

If the event arises whereby the nominee purchaser and the freeholder cannot come to an agreement within 2 months of the freeholder’s issue of the Counter Notice, then surveyors from either party can legally apply to the Leasehold Valuation Tribunal for an independent determination of the terms of the collective enfranchisement claim.

In order for a building to qualify for collective enfranchisement, it must:

  • Be a self-contained block, with a minimum of two flats The building must have no more than 25% non-residential use, and two thirds of the flats must be held by qualifying tenants
  • At least 50% of all the leaseholders in the building must participate
  • Each participating leaseholder must have a long lease – with an original term of at least 21 years or with a right to renewal

The leaseholder of a house only has the right to enfranchise if certain qualifications are meet. These include:

  • The house – the building must be reasonably considered a house. If it has been divided into flats, the leaseholder must own the whole house
  • The lease – must be a lease with a term originally of more than 21 years
  • The leaseholder – must own the lease of the house at the time the enfranchisement claim is made and have held the lease for the past 2 years or 2 years in the past 10 years

The valuation method which is used to determine the price the leaseholder will pay is required by the law to value the freeholder’s interest as if the house were being sold in the open market. Therefore, the valuation of the property will fairly compensate the landlord for the loss of their house.

The leaseholders who wish to collectively purchase the freehold of their building must cover the freeholder’s reasonable legal costs and valuation fees. This does not include the freeholder’s costs for negotiating the price or for dealing with First-Tier Tribunal procedures.

 

 


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