This case study is based on a real instruction. Names, addresses and identifying details have been changed, and figures rounded, to protect client confidentiality.

The building and the group

A three-storey Victorian house in Merton, converted into six self-contained flats in the 1980s. All six flats were held on 99-year leases granted in 1999, leaving 74 years unexpired at the date of the claim. Ground rents were £100 per annum rising to £200 at year 33 and £400 at year 66.

Four of the six leaseholders wanted to buy the freehold. The other two — one an absentee investor, the other a recent purchaser reluctant to spend — declined to participate.

Did they qualify?

Yes, and this was the first thing we confirmed before any costs were incurred. Under the Leasehold Reform, Housing and Urban Development Act 1993, a collective claim requires:

• the building to contain two or more flats, with at least two-thirds held by qualifying tenants — satisfied, all six were;
• no more than 25% of the internal floor area in non-residential use — satisfied, the building was wholly residential;
• participating tenants holding at least half the flats in the building — satisfied at four of six.

The two non-participants were not obstacles. They simply would not share in the freehold, and their flats would be acquired subject to their existing leases, with those leases becoming an income asset of the new freehold company.

The valuation, and where the argument was

The premium under Schedule 6 of the 1993 Act is the sum of the freeholder’s loss: the capitalised ground rents, the deferred reversion on each flat, the leaseholders’ share of marriage value where leases are under 80 years, and — the contentious element here — any additional value the freeholder can demonstrate, including development or “hope” value.

The freeholder’s surveyor claimed £198,000, of which £85,000 was attributed to the roof space, on the basis that a loft conversion could create a seventh flat.

We did not dispute that roof space can carry value. We disputed the figure, and we did it with evidence rather than assertion:

• Planning constraints. The building sits in a conservation area with an Article 4 direction removing permitted development rights for roof alterations to the front elevation. Two comparable applications for mansard extensions on the same street had been refused within the previous four years.
• Physical constraints. The available head height gave a usable area of roughly 34 sq m before habitable-room ceiling heights were considered, and the existing structure would have required substantial strengthening.
• Title constraints. Two of the top-floor leases demised the roof void airspace, meaning the freeholder could not have delivered the scheme without buying those rights back.
• Risk and delay. Any purchaser of the freehold in the open market would discount heavily for the probability of refusal and the cost of resolving the title position.

The negotiation and outcome

We served the Section 13 notice, and negotiated over four months. Our position throughout was that the roof space carried little or no value that a tribunal would allow on this evidence: the planning refusals were recent and directly comparable, the title position was an obstacle the freeholder could not unilaterally remove, and the usable area was marginal.

The hope value element settled at £5,000 — a reduction of £80,000 on the claim. That figure was a commercial compromise rather than a valuation. We could have pressed for nil, and we thought a tribunal would probably have arrived close to it. But taking the point to determination would have meant several further months of delay, and irrecoverable costs on both sides that would comfortably have exceeded the £5,000 in issue. Weighing the likely gain against the cost, delay and residual risk of an adverse finding, settling at a nominal figure was the right advice to give the group.

Offsetting movement elsewhere in the valuation brought the overall figure to:

Note that the marriage value figure moved up. That is not a mistake. Once the roof space value was stripped out, the freeholder’s interest was reconfigured and the marriage value calculation followed. A credible negotiation is not simply arguing every line downwards — it is getting each element right, and being seen to do so is what makes the contentious points land.

Apportionment between the participants

The four participants contributed in proportion to the benefit each received, which we assessed by reference to the relative value of each flat and the different unexpired terms and rents. Two of the flats were significantly larger, and a straight quarter-share split would have been materially unfair. We provided a written apportionment schedule that the group’s participation agreement adopted without amendment.

Each participant then took a 999-year lease at a peppercorn rent on completion, granted by the new freehold company they jointly owned.

Frequently asked questions

How many leaseholders do you need to buy the freehold?

At least half the flats in the building must participate, and at least two-thirds of the flats must be held by qualifying tenants. In a six-flat building, three participants is the minimum. Non-participants are not required to agree and cannot block the claim.

What is hope value in an enfranchisement claim?

Hope value is the additional amount a purchaser in the open market would pay for the prospect of realising development potential — most commonly roof space or a garden plot. It is frequently overstated in opening claims. It should be assessed on the evidence of what is actually deliverable, discounted for planning risk, title constraints and time. Where the evidence shows the prospect is remote, the value should be nominal — though a nominal figure agreed by negotiation is often a better outcome than a nil figure won at tribunal, once costs and delay are taken into account.

Is it worth going to tribunal over a disputed element of the premium?

Only where the amount in dispute justifies it. Tribunal proceedings add months to the timetable and generate costs that are largely irrecoverable, so an element worth a few thousand pounds is rarely worth determining. The judgement is whether the likely gain exceeds the cost, delay and risk of an adverse finding — and that assessment is part of what you are paying a surveyor for.

Can we extend our leases after buying the freehold?

Yes, and this is normally the point of doing it. Once the participants own the freehold company they can grant themselves 999-year leases at a peppercorn ground rent, at no further premium.

Should we wait for leasehold reform before buying our freehold?

The valuation reforms in the Leasehold and Freehold Reform Act 2024, including the abolition of marriage value, are not yet in force and depend on further legislation and consultation. Meanwhile leases continue to shorten. We advise on this case by case, but for buildings with leases approaching or below 80 years, delay usually costs more than it saves.

Thinking about buying your freehold?

Blakes Chartered Surveyors have 20 years of experience valuing and negotiating freehold purchases under the Acts, from two-unit Victorian conversions to mixed-use developments of 80+ flats. We act for leaseholder groups and for freeholders, across all 32 London boroughs and nationwide. Our Associate Director Ridhwan Omar leads on collective enfranchisement.

Call 020 7373 7373 or email info@blakessurveyors.com for an initial view on qualification and likely cost.