When it comes to purchasing a flat, most are sold on a leasehold basis. What this means is that you own the property for a fixed period of time, but you do not own the land that the property is situated on.
Leasehold enfranchisement is a distinct area of law. Many firms do not provide leasehold enfranchisement as it requires specialist expertise from a qualified and experienced professional. There are many statutory deadlines, dates and procedures to follow, and where you miss any one of them, it means you may lose your right to sell or buy the freehold.
Our team of freehold enfranchisement solicitors have considerable expertise assisting those looking to purchase the freehold of their flat. We can sidestep potential problems, ensuring a smooth freehold transaction. We will take the time to provide clear advice and practical guidance, so you are fully supported throughout.
For swift advice and representation on all aspects of freehold enfranchisement, please contact our London office to speak to a member of our team now. Or you can make an enquiry online and we will get back to you shortly.
Leasehold enfranchisement FAQs
What is leasehold enfranchisement?
Where leaseholders make the decision to buy the freehold for their flat block, this is known as freehold enfranchisement. It is sometimes otherwise known as collective enfranchisement. This means each party will own a share of the freehold.
Having freehold ownership of the property means the leaseholders own the building and the land it stands on. This provides the owners with complete control over property repairs, the service charge, and any other type of management necessities.
The only way that freehold enfranchisement can happen is when a collective of the flat leaseholders come together and jointly purchase the freehold of the property, making each party a part owner of a company which they form to manage the building.
What is the benefit of buying your flat freehold?
If leaseholders are unhappy with the management of their property, they can manage it themselves by purchasing the freehold from their landlord.
The benefits of buying your freehold include the following:
- It frees you from the problems caused by unscrupulous landlords
- Control of freehold is often attractive for buyers — estate agents frequently refer to it by saying that the purchaser will obtain "a share of the freehold"
- It gives you control of the management of the block, service charges and the granting of lease extensions and lease variations
- No requirement to pay ground rent
- Fewer conditions, for example, it can be your decision to have a pet or sublet
- If a number of leaseholders have "short" leases, they may find it more cost-effective to buy the freehold collectively rather than each of them seeking a lease extension separately
- Owning the freehold of a flat adds value
What is the process of purchasing freehold enfranchisement?
If you and the other property leaseholders wish to purchase the freehold of the property, you can directly reach out to your landlord at any given point. Alternatively, if the landlord wishes to sell the freehold of the property, you have the right to first refusal by law.
It’s important that the correct process is followed, and there are a number of steps that need to be carried out to ensure that it is done correctly. If you are interested in collectively purchasing the freehold of your flat, the following steps should be taken:
1.Checking if you’re eligible
The first step of purchasing the freehold of a property is checking whether you and the other tenants are eligible to do so. See the FAQ below for the eligibility criteria.
2.Organising the enfranchisement and choosing a nominee purchaser
When you know who wants to be involved in the collective enfranchisement, it is recommended to have an agreement put in place. The agreement is known as a ‘participation agreement’, and this will set out voting rights, negotiation and agreement of terms, and financial contributions.
In addition, the group of leaseholders will also need to select a nominee purchaser who will acquire the freehold and become the landlord of the freehold. This could be an individual, a corporate entity, a trust or a company formed by the tenants. The individual, trust or company will be named in the ‘initial notice’.
If the leaseholders wish to use a company to purchase the freehold, a solicitor can advise on how the company can be formed and more. The company must be formed prior to the initial notice.
3.Having a surveyor value the freehold premium
Before serving a formal offer, the leaseholders will need to have a surveyor assess the freehold and provide a recommended value for the purchase price.
4.Serving the initial notice
The freehold purchase process can commence when at least 50% of the building’s leaseholders serve a formal offer. This is officially known as an ‘initial notice on the building’s freeholder in return to buy the property’s freehold’.
The initial notice will name a nominee purchaser. Once the notice has been served, you will become responsible for your landlord's ‘reasonable’ legal and valuation fees for dealing with the freehold purchase claim. The landlord may instruct a surveyor to inspect the building to prepare a freehold valuation in preparation for your ‘counter notice’.
5.Receiving the landlord's counter notice
Your landlord has just over two months to reply to your notice with their ‘counter notice.’ Their counter notice will either accept your claim or deny it. If your notice accepted, the landlord may offer a premium that is higher than your suggested value.
6.Negotiating With Landlord
If you want to offer a lower price for the freehold, you will then have up to six months within which to negotiate the premium and terms of the conveyance with the landlord. If it is not possible to reach an agreement with the freehold owner, an application can be made to the Leasehold Valuation Tribunal, which will determine the valuation of the freehold.
7.The conveyancing and completion process
Once the premium and terms of the conveyance are agreed or determined, you have a further window of between zero and four months to complete the conveyancing process and buy the freehold. Once the freehold transaction is completed, it is registered at the Land Registry.
Who is eligible to purchase the freehold of a property?
In order to purchase the freehold of the property, leaseholders must meet several requirements:
- The building must contain no more than 25% non-residential space by floor area (for example, shops or other commercial premises)
- At least two-thirds of the flats must be let to qualifying leaseholders
- The building needs to contain at least two flats
In general, qualifying leaseholders are those who have long leases (i.e., originally granted for more than 21 years). If the building qualifies, at least half of the qualifying leaseholders must participate in order to initiate a collective purchase.
How much does It cost to purchase the freehold of your property?
The cost of the freehold will most usually depend on the building, its value and the length of the lease. The most usual costs that are involved with buying the freehold of the property include:
- The freehold purchase premium – the Leasehold Reform Housing and Urban Development Act 1993 sets out how this can be calculated but is complex and requires professional specialist assistance
- The surveyor’s freehold valuation cost
- Legal fees – e.g. conveyancer fees
- Stamp Duty Land Tax (if applicable)
Can a freehold landlord refuse to sell?
Under the Leasehold Reform Housing and Urban Development Act 1993, as long as the tenants qualify to purchase the freehold, the landlord cannot refuse to sell.
Even where the leaseholders do not qualify to purchase the freehold (such as if fewer than 50% of leaseholders want to purchase the freehold), they can still approach the landlord. However, it will then be the landlord’s decision whether they choose to proceed with the transaction or not.
Why choose HPLP for freehold enfranchisement?
At HPLP, we are recognised experts for our freehold enfranchisement service in London and are accredited members of the Association of Leasehold Enfranchisement Practitioners (ALEP). We are also proud to be accredited members of the Law Society Conveyancing Quality Scheme.
We offer free initial advice of up to a half-hour and fixed fee estimates. This means you will know what you will be charged should you choose to go ahead with the purchase with our guidance.
Once you make the decision to work with our solicitors, we will swiftly start the process. Our freehold enfranchisement solicitors provide a bespoke service and always work proactively to avoid unnecessary delays. Once your transaction is finalised, our solicitors can register the ownership at the Land Registry and, where applicable, file the Stamp Duty Tax Return.
To find out if it might be suitable to buy the freehold of your block of flats, contact our firm to speak with solicitor Ash Oberoi for free and discuss your situation in greater detail.
Get in touch with our leasehold enfranchisement lawyers in London
For swift advice and representation on all aspects of freehold enfranchisement, please contact our London office to speak to a member of our team now. Or, you can make an enquiry online, and we will get back to you shortly.