Leaseholders acting together may be able to require the Freeholder to sell the Freehold of the Property to the Leaseholders under the Leasehold Reform Housing and Urban Development Act 1993.
Purchasing the Freehold offers a number of advantages:
- The Leaseholders can extend the length of their leases to increase the value of their property.
- New leases can resolve any discrepancies within the old leases e.g. poor drafting, non compliance with the requirements of the Council of Mortgage Lenders.
- It gives the Leaseholders control of the management of the Building and who the Managing Agent is.
Do the Leaseholders & Building qualify for enfranchisement?
- There must be at least two flats in the Building containing qualifying tenants i.e. a Leaseholder who was originally granted a lease of over 21 years.
- At lease two thirds of the total number of flats in the Building must be owned by qualifying tenants.
- At least 50% of the qualifying tenants must want to proceed with enfranchisement.
- The Freeholder must not be a resident landlord i.e. a block of four or fewer flats where the Freeholder or an adult member of his family lives there.
- Is the Building or part of the Building self-contained i.e. structurally detached from other buildings or parts of buildings?
- No more than 25% of the Building can be used for non-residential purposes e.g. commercial leases.
Enfranchisement key steps:
- Initial Review & Valuation - A valuation should be carried out at the outset to get an idea of the price of the Freehold.
- Participation Agreement - An agreement should be entered into between the Leaseholders so that they know what their rights and responsibilities are during the enfranchisement process.
- Create a Nominee Purchaser - A Company should be incorporated to act as the entity purchasing the Freehold. A Company enables ownership to remain constant whilst membership of the Company changes with the ownership of the flats.
- Serve the Initial Notice - The notice sets out the proposed terms of purchase and a date at lease two months away by which the Freeholder must respond by, the “Response Date”.
- Freeholder serves counter notice - The Freeholder has to serve their notice before the Response Date. This will either accept the right of the Leaseholders to claim enfranchisement, accepts the right and disputes the terms of sale, or disputes the right.
- Negotiation - The parties then have period of at least two months to negotiate any outstanding issues.
- Application to Tribunal - If there are outstanding issues which cannot be resolved the parties can apply to the Tribunal within six months of the Counter Notice.
What is the price of purchasing the Freehold?
The price of the Freehold will depending upon several factors: location of the Property, length of the leases, redevelopment value etc. A qualified surveyor will be able to carry out an in depth survey and provide a realistic figure.
What is the cost of purchasing the Freehold?
In addition to the premium the Leaseholders are responsible to pay the Freeholder’s costs for the Enfranchisement process. This includes the cost of:
- checking whether the participating Leaseholders have the right to acquire the freehold;
- the conveyance of the freehold; and
- the cost of a surveyor for advice on the value of the freehold.
The Freeholder cannot recover any costs from Leaseholders in connection with a Tribunal application.
These costs become liable once the Initial Notice is served.
How Attwells can help?
Attwells’ specialist legal team has experience with the enfranchisement process and making successful enfranchisement claims. We can help you with:
- Gathering and considering whether an enfranchisement claim is suitable.
- Setting up the Company.
- Serving the Initial Notice.
- Responding to the Freeholder’s counter notice.
- The conveyance of the Freehold.
- Amending or extending leases after enfranchisement.