There is a statutory mechanism for groups of leaseholders who wish to take control of their building and buy the freehold (subject to certain conditions). This is called collective enfranchisement.
This is provided for in the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”). Once you have bought the freehold, you will be able to manage and decide all issues relating to the building. You can grant yourselves lease extensions, licences for alterations etc. at nil cost.
The leaseholders and the building have to “qualify” under the 1993 Act before you have the right to collectively enfranchise. In short, you must all have long leases (over 21 years) and the building must be a self-contained building or part of a building which contains 2 or more flats under long leases. There must also be a majority of leaseholders participating in the enfranchisement and any commercial element of the building must not exceed 25% of the total floor area. There are other more detailed considerations and if instructed, we will make the necessary checks for you.
You will need a specialist valuation which we can arrange for you. A company must be formed with the participating leaseholders and it is this company that will eventually be the owner of the freehold with the leaseholders as shareholders of that company. We can form the company for you aswell as take care of the Participation Agreement which will govern your relationship with the other leaseholders during the enfranchisement process.
The process starts by the service of a Notice of Claim upon the freeholder and any other intermediate landlord offering the premium for the freehold and any other appropriate terms, such as a leaseback of commercial premises. The freeholder has 2 months to serve his Counter Notice in which it will either accept or reject the terms offered.
The parties then have 6 months from the date of the Counter Notice to reach settlement as to the premium and the conveyance, failing which you must make an application to The First Tier Tribunal (FTT) for final determination. A failure to make such an application will render the Notice of Claim withdrawn and you will have to pay the wasted costs of all parties to that date.
The process can take from 4 months to a year to complete, depending on whether the terms can be agreed easily.
Once a Notice of Claim is served, you are responsible for payment of not only your own costs throughout the process but also all other parties’ reasonable costs, whether or not the matter completes. You are however not responsible for the freeholder’s or other landlord’s costs incurred in preparation of, or incidental to the FTT application.
We can advise you on all aspects of collective enfranchisement and the Right to Manage. Click here for a short guide with further information.