Collective Enfranchisement - Buying the Freehold & RTM
This is the right - subject to qualification - for the flat owners in a building, or sometimes part of a building, to come together to buy the freehold of the building. The relevant Act is the Leasehold Reform Housing and Urban Development Act 1993.
So long as at least half of the flats in the building take part - and the tenants and the building itself qualify - then the landlord cannot refuse. The process is quite complex and the correct notice has to be served on the landlord, so it is sensible to use both a specialist lawyer and surveyor.
The benefits of acquiring a freehold, however, can be well worth the effort. It allows the tenants to take over the maintenance and management of the building; it can reduce costs such as administration costs charged by the freeholder; and it often enables residents to get things done to the building which in turn protects their leasehold home and their investment. It is also likely to make the property more attractive to potential buyers as the leaseholders themselves have control of the building.
There is a statutory process set out for tenants to follow and providing that the tenants and the property satisfy the qualification requirements, and the process is followed properly, then the freeholder can be forced to sell the property in return for the payment of an appropriate premium.
Where a sufficient number of tenants want to proceed - and are happy with the estimated costs - we recommend that the participating tenants put in place a participation agreement to govern themselves and their joint actions; both during and after the collective enfranchisement process. This would cover matters such as voting rights, the conduct of negotiations, agreement of terms and how each party will contribute to the costs. It can also set out what will happen after the freehold has been acquired. A common outcome of enfranchisement, and one of the key benefits, is that the new freeholder grants all the participating tenants new, longer leases.
A professional surveyor is required to value the property and we work closely with the surveyor on your behalf to establish the necessary terms and to agree a suitable premium to pay the freeholder. If terms cannot be agreed with the freeholder - which is highly unlikely as terms generally are always agreed - then the application can be taken to the First-tier (Property) Tribunal to determine the outcome.
How LCF Law can help
This is a very brief overview of the process of collective enfranchisement and what is involved. A more detailed and very helpful guide is provided by The Leasehold Advisory Service (https://www.lease-advice.org/advice-guide/ce-getting-started) which provides much fuller detail about the process and the potential pitfalls that can be encountered. It also gives advice on the selection of professional advisers, including: “Leaseholders should take all possible steps to ensure their chosen adviser(s) have full knowledge and experience of the legislation, practices and procedures.”
LCF Law is a member of ALEP (the Association of Leasehold Enfranchisement Practitioners) and we are one of only a few firms in the North of England who have the required depth of experience and knowledge to deal with the full range of potential issues or circumstances that can arise during a collective enfranchisement process. We have acted for residential blocks ranging from two to 30 leaseholders. And we also act for freeholders when they are served notice by a group of leasehold tenants.
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