BLAKES Chartered Surveyors offer a comprehensive Collective Enfranchisement service representing both leaseholders and freeholders and can coordinate the entire process on your behalf from inception to completion.
Leasehold Reform Housing and Urban Development Act 1993
Collective Enfranchisement is a very complex area of practice and requires specialist legal and valuation advice in all cases. We are able to assist you and your fellow leaseholders in establishing eligibility to purchase the freehold of your building as well as discuss some of the pros and cons of doing so. Following an inspection of the development, we will then prepare detailed valuation advice and liaise with your own or one of our specialist solicitors to progress the purchase all the way through to completion.
Landlord & Tenant Act 1987
Your decision to consider purchasing the freehold may have been prompted by the service of what is known as a Section 5 (A/B/C) notice from your freeholder offering you Rights of First Refusal under the Landlord & Tenant Act 1987. We can assist you in establishing eligibility, whether the offer is a reasonable proposition and by providing guidance on taking the matter forward.
Call us today for a free consultation with one of our friendly advisors and to find out how we can assist you.
Why Purchase The Freehold?
One of the main reasons leaseholders decide to purchase the freehold of their property is so they can take control of the management of their building. If you are dissatisfied with the manner in which your current landlord is managing the building, purchasing the freehold is one way to take control of this. You may also wish to make alterations & improvements to the building or grounds that would normally require freeholder’s consent.
The other main reason to acquire the freehold is to be in a position to grant new long leases to the flats themselves. Many mortgage lenders are reluctant to advance funds against leases with less than 75 years unexpired as they do not represent adequate loan security. By granting new long leases (typically 999 years leases at NIL ground rent) you can both protect and significantly enhance the value and saleability of your property. The grant of a new lease is also an opportunity to resolve difficulties and defects within the old lease.
Do I Qualify? Establishing Eligibility
Under the Leasehold Reform Housing and Urban Development Act 1993 (as Amended) an application to purchase your freehold must be made by at least 50% of the flats in the block and each of those flats must have been originally granted leases that were in excess of 21 years. In smaller converted period properties where there are just two flats, both must participate in order to qualify. There is no residency requirement for collective enfranchisement and so you do not necessarily have to have occupied the property allowing those holding leases as buy to let investments the ability to participate as well. There are certain restrictions that may apply and your appointed solicitor will be able to advise more closely on this however if you own more than two flats within a particular building you will not qualify the participation requirements. If your property is above commercial premises, these parts must not exceed 25% of the overall floor area of the building eligible for enfranchisement. In these instances, you are still entitled to obtain a statutory lease extension providing you have owned the property for at least 2 years and we can also assist you in this regard.
The Statutory Process – Collective Enfranchisement
Setting Up The Company – The Nominee Purchaser
In most cases, it is advisable that a company is incorporated to purchase the freehold interest (‘the nominee purchaser’). This is because when any of the participating flats are sold, the freehold owner will remain the same and only the list of members/shareholders will need to be changed. Your appointed solicitor will be able to incorporate the company on the participant’s behalf easily and relatively cheaply. In some instances, for example where there are 2/3 units in the building a freehold company may not be required but your solicitor will be able to recommend the best way to proceed.
Once we have prepared a detailed valuation report for the proposed collective enfranchisement, your solicitor will then draft and serve the initial notice (Section 13) on the freeholder. In addition to including details of the building, the participating leaseholders and the name of the nominee purchaser (if applicable), this Notice will state the premium we believe should be payable for the freehold of the building itself and a separate figure must be included for any appurtenant property such as the paths, gardens and grounds which may be demised within the respective leases. Your landlord will then have a two month period in which to respond with a Counter Notice proposal. The Counter Notice must admit whether you have a right to purchase the freehold and if not, it must specify the reasons why. The Counter Notice must also state which of the proposals in the initial notice are accepted, and specify counter proposals for any proposals which are not accepted. Disputed proposals normally comprise the premium itself and less commonly the terms of the transfer itself.
The landlord is entitled to request access to the respective flats within the building for the purpose of having their own valuation prepared and adequate notice must be provided to you.
Terms Of Acquisition
Once the Counter Notice has been served, we will commence negotiations with your landlord’s surveyor in respect of the premium to be paid in order to reach an amicable settlement. Your appointed solicitors will also progress negotiations on the terms of the Transfer Deed of the freehold title.
If the terms of the Transfer deed and/or the premium remain in dispute two months after the Counter Notice has been served, either party may apply to the First Tier Tribunal to have these matters determined.
Any application must be made within six months of the date the Counter Notice was served and if no application is made within this time and terms of acquisition are not agreed, your notice will be deemed to be withdrawn. This means that you will void your current claim and will not be entitled to make a further claim for 12 months.
Once the terms of the acquisition are agreed, you will then have a period of 4 months in which to complete on the freehold purchase. This means that you must have funds in place and the Transfer must have been signed by both parties. If completion does not take place within this time, your claim will be deemed to be withdrawn unless a County Court application is made to protect your claim. Your solicitors will be able to advise you further in respect of this.
Costs Of Acquisition
You will be responsible to cover your own valuation and legal costs as well as those incurred by your landlord, as required under the Act. The landlord’s costs must be deemed reasonable failing which an application for determination on costs to the Tribunal can be made. Each party is responsible for their own negotiation fees as well as any costs in the event the matter is referred to the Tribunal.
For more detailed information on the Collective Enfranchisement process, please click HERE for a complimentary guidance booklet prepared by the Leasehold Advisory Service.