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Leasehold Enfranchisement (Acquiring the Freehold)

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If you own a leasehold flat and meet certain qualifying criteria, you, along with other qualifying leaseholders in your building, have the right to force your freeholder to sell the freehold to you. This process is known as collective enfranchisement. 

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BENEFITS OF COLLECTIVE ENFRANCHISEMENT

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There are a number of potential benefits which accrue when tenants acquire the freehold.  These include:

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• Granting yourselves extended leases of 999 years at minimal cost and with no requirements relating to "qualifying criteria"

• Taking control of the management of your building (and therefore the service charge)

• Correcting defects in your existing leases and changing leases to include additional parts of the building such as an un-let roof or basement space

• The ability to collectively develop the building or sell off parts (for example, the roof space) 

• Removing ground rent 

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QUALIFYING CRITERIA

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A number of criteria need to be met for you to have the legal right to acquire the freehold.

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For individual flat owners, the main criteria are:

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• Each participating tenant must own a "long lease" (one originally granted for more than 21 years)

• Each participating tenant must own no more than two flats in the building 

• The participating tenants must own at least a combined 50% of the flats in the building (there is no requirement to invite all flat owners to participate in the enfranchisement process meaning that sufficient participating tenants can come together and proceed on their own)

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The building itself must also meet the following criteria:

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• It must be self-contained, or part of a building. (If part of a building it must constitute a vertical division of the building, with services either independent to that part, or could be so provided without significant interruption to the remaining part)

• There must be at least two flats in the building and at least two-thirds of the flats must be owned by qualifying tenants (see above)

• No more than 25% of the internal floor area of the building, excluding common areas, should be in non-residential use

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EXCEPTIONS TO THE RIGHT TO BUY THE FREEHOLD

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Please note that you do not have an automatic right to buy the freehold if any of the following apply:

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• The building is a conversion into four or fewer flats and;

• It is not a purpose-built block, and;

• the same person has owned the freehold since before the conversion took place and;

• they, or an adult member of their family, has lived there for the past 12 months

• The building is within a cathedral precinct.

• It is a National Trust property

• It is a Crown property (although the purchase may be possible by negotiation on case-by-case basis)

• The freehold includes any operational railway e.g. bridge tunnel, track.

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CONSIDERATIONS

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There are a number of points to be considered before embarking upon a claim for enfranchisement.  The following provides a brief summary.

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It is important to obtain a valuation from a specialist Valuer who can advise you of the likely premium you will be asked to pay for the freehold.  The Valuer should advise on the initial offer price to be put to the freeholder and negotiate on your behalf with the aim of securing a fair price.  The Valuer will then advise on  how this should be divided between the participating flat owners. 

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LEGAL FEES

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Due to the somewhat complex nature of the process, it is not meaningful to provide estimates of fees without a full knowledge of the specific circumstances.  Once these are known, we would be happy to provide a detailed estimate of fees to cover all aspects of the collective enfranchisement claim.

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Since the claim represents, and is part of, a process of negotiation, it is possible that the tenants collectively and the freeholder are unable to reach an agreement as to premium following negotiation by their respective agents.  In this case, parties can refer the matter to the First-Tier Tribunal to resolve matters. 

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At this stage, we will again provide an estimate of fees for carrying out this work if required.

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EXAMPLES OF OTHER COSTS

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Please note that, in addition to legal fees and disbursements, you will be responsible for paying the following: 

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• Your Valuer’s fees;

• The legal and valuation costs of the freeholder and any intermediate landlords. These costs will include the freeholder costs relating to investigating whether the flat owners and building  qualify for a collective enfranchisement claim

• The costs to the freeholder in obtaining a valuation of the premium which should be paid, their serving of a Counter-Notice, and the drafting and completing the Transfer Deed and any leaseback (conveyancing costs).

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The freeholder is not entitled to recover its negotiation costs (the costs of its Valuer negotiating with your Valuer) or any costs in connection with preparing or attending a tribunal hearing. If the claim did proceed to the Tribunal both parties would pay their own costs.

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Please contact us to discuss your specific circumstances if you are considering leasehold enfranchisement.

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