September 13, 2016

Leasehold Enfranchisement

As the owner of a flat in the United Kingdom you are a leaseholder, with the freehold of the building often owned by another individual or company. They are responsible for managing and maintaining the building as a whole, and will pass the costs on to you and other owners of flats in the building in the form of a service charge. In many cases, the leaseholders of flats prefer to group together to own the freehold of the building themselves; thereby having more of a say in decisions that affect the property, and avoiding the need to negotiate with a third party.

The 1993 Leasehold Reform Act gives leaseholders a right, under certain conditions, to purchase the freehold of their properties (Leasehold Enfranchisement) even if the freeholder doesn’t wish to sell.

Anyone intending to pursue a leasehold enfranchisement should ensure they have finances in place before commencing the process.

The first step in the process is to consult a solicitor to confirm that you meet the requirements for enfranchisement. If you do, the solicitor can then help in preparing the statutory notice that must be served on the freeholder. Unfortunately, recent court cases have established that, if a notice is served with a valuation that cannot be justified, the notice is invalid and the cost incurred in preparing it is therefore wasted. As a result, it is vital that a full valuation is carried out by qualified professionals. They can not only accurately assess the market value of the building itself, but also the value of the freehold given the terms and remaining length of the individual leases.

Anderson, Wilde & Harris are highly experienced in preparing accurate and thorough valuations that can then be used as the basis for serving notice under the Act. In addition, they will work on your behalf throughout any negotiations that follow, ensuring that your interests are represented by professionals with an intimate understanding of the process, law, and factors that affect a valuation.

How does the process work?

After the initial notice is served, the freeholder has a set amount of time to respond. If they do not accept the offer, we will negotiate on your behalf until agreement is reached. In cases where an agreement cannot be reached, it is possible to take the case before a tribunal to make a final determination.

You cannot purchase individual freeholds for flats; rather the freehold for the entire building is bought and sold at the same time. This is done through a Nominee Purchaser who will ultimately acquire the freehold. This could be one of the lessees (leaseholders), a group of them or, as is often the case, a management company formed by some or all of the lessees for the sole purpose of owning the freehold and managing the property.

Am I eligible to purchase the freehold for the building I live in?

There are a number of criteria that must be met in order to have a statutory right to enfranchisement. If these criteria are not met, you may still be able to negotiate to purchase the freehold, or you may have a right to extend your lease. For more information about how Anderson, Wilde & Harris can advise on leasehold extensions, click here.

The criteria are as follows:

  • No more than 25% of the internal floor area of the property must be non-residential.
    and
  • Of the flats, at least two-thirds must be let to ‘qualifying leaseholders’
    and
  • Not less than half of the lessees must participate in the enfranchisement, or both if there are only two flats.

There are specific exclusions for buildings within a Cathedral precinct, National Trust properties, and Crown properties although in practice the Crown has agreed to comply with the principles of the act.

‘Qualifying’ leaseholders are those who own a lease, and are not a business or commercial tenant. There is no requirement for the leaseholder to have actually occupied the flat, so long as they have owned it.

If you are considering purchasing your freehold, or would like a valuation done to get an initial idea of how much this might cost, contact us today to find out more.