Purchasing the Freehold of your Flat Collectively
Your Right
Collective Enfranchisement is the procedure whereby leaseholders in a building or (some of them) decide to buy out the landlord by acquiring its freehold interest. Ownership of the freehold gives control over issues such as the maintenance issues, the ground rent and service charges, repairs and so on.
In future, collective enfranchisement will have to be made by a Right to Enfranchise Company or RTE, but there provisions are not yet in force.
Why Purchase Your Freehold?
Ownership of the freehold gives control over issues such as the maintenance programme, ground rent and service charges, repairs and so on. The leaseholders effectively have control over the management of the block and this can be seen as a major selling point.
In addition to management control, as landlord, the leaseholder will also be able to grant themselves 999-year leases of their flats for virtually nothing. Leaseholders with “short” leases will also find it cost efficient to collectively buy the freehold rather than each separately seeking a lease extensions.
So Just How Complicated is it to Achieve?
As every good lawyer says, this depends on several factors.
Firstly, leaseholders will have to decide whether collective enfranchisement is the most viable option in the circumstance. Brethertons can help you in this process and can offer advice on alternative options such as Right to Manage or Lease Extensions.
Once the tenants have decided collective enfranchisement is the route to pursue, Brethertons can prepare a suitable Participation Agreement which details how leaseholders will share costs and expenses, propose a 'Nominee Purchaser' to lead the application and then serve the Initial Notice on the Landlord.
Specialist valuation advice will also need to be taken and Brethertons can assist in sourcing a suitable surveyor with expert experience.
Once the Landlord is in receipt of the Initial Notice, he then has a 2-month period within which to serve his reply in the form of a Counter Notice. The Counter Notice will usually include a counter offer for the premium payable for the transaction. The landlord may also wish to vary or propose other terms.
The parties are allowed time to agree the terms of the transaction. If agreement cannot be reached between the two parties on the terms of the transaction and/or price, either party can refer the dispute to the Leasehold Valuation Tribunal (‘LVT’). Brethertons can assist you in making an application to the LVT if this becomes necessary.
What Will it Cost?
There is no secret formula to working out the premium payable as each case will be different and a specialist valuation surveyor will need to be consulted. Brethertons can assist in sourcing a suitable surveyor with expert experience.
The tenants will also have to pay the landlord’s “reasonable costs” incurred during the enfranchisement process together with their own costs. “Reasonable costs” includes professional fees and other expenses but does not include costs paid because of an appearance before a Leasehold Valuation Tribunal.
The landlord will also be entitled to compensation for severance i.e. loss of ground rent once the freehold has been transferred and where leases have 80 years or less to run, 50% of the increase in value that is likely to be achieved for each of the participating flats.
If you are a Leaseholder and wish to discuss your case with us, please contact:
