Collective Enfranchisement London & Essex

What are the benefits of buying the freehold?

There are a number of advantages of leasehold owners joining together to buying the freehold of their block of flats.

• Longer lease

Collective enfranchisement is often considered as an alternative to obtaining a lease extension. If a group of residents has purchased the freehold, lease extensions for individual properties can be agreed between the participants at no extra cost, while also waiving the ground rent. This will help boost the property’s value and make it easier to sell.

• Management control

Owning the freehold means that you will own the ground and structure of the building in legal terms together with the other participants. This gives you greater flexibility and control over the day-to-day running of the building. You are free to choose your own management company and contractors such as for communal maintenance, cleaning or gardening.

• Cost savings

Owning a share of freehold could result in lower costs for repairs and maintenance for each participating individual. Since all financial decisions regarding the block, including insurance, capital projects, daily management and maintenance are under the direct control of the leaseholders, best value can be achieved more easily.

Eligibility requirements for freehold enfranchisement

In order for a group of leasehold owners to qualify for collective enfranchisement, certain criteria must be met:

• At least 2/3 of the flats within the block must be owned by qualifying tenants (i.e. with an initial lease of 21 years or more)
• At least 75% of the building must be used for residential purposes
• The block of flats must be self-contained
• At least 50% of the flats in the block must agree to collective enfranchisement
• Leasehold owners who own 3+ properties in the block do not qualify for participation
• The freeholder (or close relative) does not live in one of the properties

To qualify for collective enfranchisement, it does not matter whether the flat is owned by an individual or a company, or whether or not the owner lives there.

Key steps to buying the freehold

The initial step towards collective enfranchisement is for the leaseholders to set up a company in which they are all members, and to choose a nominee purchaser.

The Initial Notice contains certain information about the leaseholders and the building, the name of those seeking freehold and the price offered. The Notice is then served on the freeholder who has 2 months to reply.

A Counter-Notice is then served by the freeholder stating whether the request for collective enfranchisement is accepted and on what terms.

If the freeholder responds too late (or not at all) to the Initial Notice, the leaseholders are granted the legal right to buy the freehold on the terms specified in the Notice.

If negotiations between the nominee leaseholder and the freeholder fail, the leaseholders can apply to the Leasehold Valuation Tribunal within 6 months of receiving the Counter-Notice.

To get started with the process, leaseholders must do the following:

1. Check to see if eligibility criteria for buying the freehold are met
2. Setting up a company of qualifying leaseholders
3. Choosing a nominee purchaser
4. Instructing solicitors and surveyors
5. Seeking expert advice and a freehold valuation to determine the purchase price
6. Serving the Initial Notice on the freeholder

How much will it cost to buy a share of freehold?

The price payable for the freehold depends on the number of factors including the value of each individual flat in the building and the number of years left on each lease. The Leasehold Reform, Housing & Urban Development Act 1993 contains a formula that can be used by freehold valuation surveyors to provide an estimate of the premium to the leaseholders taking part in the enfranchisement process.

A thorough evaluation of what actually constitutes the freehold you are buying is essential. There could be a basement or underground car park included as part of the building, which may complicate the purchase. It is also worth pointing out the purchase price will be higher if any individual leases have less than 80 years left to run.