If you’re the freeholder of one or more blocks of flats, there are seemingly a million and one things to keep track of, and you need to be aware of the many legal issues that could occur between you and the leaseholders. But what happens when those leaseholders get together and wish to acquire the freehold? Here’s a quick guide to elected for leasehold enfranchisement [also known as freehold purchase] and what you need to do as a freeholder. Enfranchisement is different from lease extension under which the leaseholder can increase the term of the lease but does not acquire the freehold.
What Is Enfranchisement?
Due to the 1993 Leasehold Reform Act (amended), leaseholders who own flats in a building have the right to join together and ask the landlord to sell them the freehold. Once this has been completed, they will, together, be the new freeholders, will own their own block and will be in charge of the running of the building as they wish. There are, however, certain requirements that have to be fulfilled in order for this to happen, the main two being that: it can only occur in a building where at least 75% of the floor area is being used for residential (as opposed to commercial) purposes, and it can only happen if at least two thirds of the flats are let to qualifying leaseholders. If they agree, they can then get together and inform you of their intent through an Initial Notice.
What Do I Need To Do As The Freeholder?
Once you have been given notice of the planned enfranchisement, you have to serve your Counter-Notice by the date specified on the original notice. In this Counter-Notice, you must either agree to the terms, propose alternative terms (such as a difference in cost), not agree your right to the freehold (and include your reasons for doing so), or neither admit nor deny entitlement. In this case, you will need to state that an application should be made to the court, and this can happen if you intend to redevelop the premises.
What If I Don’t Agree To The Terms?
As has been noted, you can disagree with the terms if you wish to propose your own, or if you plan on redeveloping either the whole or part of the premises. However, this only applies if at least two-thirds of the building’s leases are due to terminate within five years of the original notice being served. If you serve a Counter-Notice to the Nominee Purchaser and the terms still can’t be agreed on, the case will be taken to the Leasehold Valuation Tribunal (LVT) after a period of two months. They will then review the issue and decide on a course of action. If it is your intention to issue a Counter-Notice, it is worth noting that you must do so within the specified time period or the tenants may apply for a Vesting Order from the county court; this could result in them acquiring the freehold under the original terms put forth in the Initial Notice, without your alternative terms being considered at all.
Seek Specialist Professional Help Before You Start
Whether you agree to the terms put forward by the leaseholders or not, you should seek professional advice from an expert solicitor as soon as possible to ensure that you are doing everything correctly. There are only a small number of solicitors out there who genuinely specialise in the area of freehold purchase, so make sure you do a little research before instructing a solicitor to represent you through the enfranchisement procedure. You will also need to appoint a specialist surveyor to value the freehold purchase. The good news, however, is that your reasonable legal costs as the freeholder [which include the reasonable costs of any valuation of freehold] must be paid by the leaseholders.
Tim Bishop is senior partner of Bonallack and Bishop – solicitors who specialise in lease extension and lease enfranchisement for leaseholders and freeholders alike throughout England and Wales. For more information call them on 01722 422300 or visit their specialist websites at http://www.enfranchisementsolicitors.co.uk, http://ww2.freehold-purchase.co.uk or http://www.leaseextensionuk.co.uk.
Tim Bishop
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