It is becoming quite common for the leaseholders of blocks of flats to try to acquire the freehold interest in the building and in this article I will try to explain the basis of the legislation and the procedures that you need to follow to get started.
The Leasehold Reform, Housing and Urban Development Act 1993 gives the lessees of residential flats the right to acquire the freehold of the building containing the flats and this is known as “Collective Enfranchisement”. Before enforcing this legislation, however, it is wise to make some enquiries. If the landlord has either recently sold, or is proposing to sell the freehold, the lessees may have rights to acquire the freehold under The Landlord and Tenant Act 1987, and this can often be cheaper.
If the landlord wants to sell the freehold he should serve a notice on the lessees offering them first refusal. If this is the case you would have to consider whether it would be cheaper to accept the landlord’s offer rather than pursue Collective Enfranchisement. If the landlord has recently sold the freehold, but has not served a notice on the lessees giving them first refusal the lessees have the right to have the freehold transferred to them on the terms of the recent sale. Again, you would have to consider whether this would be a better option than pursuing Collective Enfranchisement.
If the above options are not available the lessees can acquire the freehold in accordance with Chapter 1 of Part 1 of The Leasehold Reform, Housing and Urban Development Act 1993.
Firstly we will look at what exactly the Act allows you to acquire. Obviously you are entitled to acquire the freehold interest in the building containing the flats, but you are also entitled (but not required) to acquire
- Any appurtenant property, which is demised by the lease held by a qualifying tenant of a flat within the relevant premises; or
- Property which any tenant is entitled under the terms of the lease of their flat to use in common with the occupiers of other premises
“Appurtenant property” means garages, outhouses, bin stores, gardens, yards etc. This means that you can acquire the freehold of communal gardens, garages and parking areas at the same time that you purchase the freehold of the building.
Secondly you will need to check the premises qualify under the Act. The premises will qualify if they
- Consist of a self-contained building or part of a building;
- They contain two or more flats held by qualifying tenants; and
- The total number of flats held by such tenants is not less than two thirds of the total number of flats contained in the premises
A qualifying tenant is a tenant of a flat under a long lease. A long lease is a lease for a fixed term of more than 21 years. Most lessees will, therefore, be qualifying tenants, but there are a number of exceptions. If a lessee owns three or more flats in the building they are excluded and if the lessee is a corporate body they are also excluded. The main purpose of these exclusions is to ensure that in general the right to collective enfranchisement is limited to individual lessees rather than companies or major property investors. Having said that, there is no requirement to actually occupy the property; you can still be a qualifying tenant if you rent out your flat, as long as you don’t own three or more flats in the building.
Having established that the premises qualify and that there is the requisite number of qualifying tenants, you will need to establish who the freeholder is. In some cases you will be paying ground rent and other charges direct to the freeholder and you will have their name and address. If the rent is collected by a managing agent you may need to obtain details of the freeholder from the management company or from the Land Registry. Under Section 11 of The Leasehold Reform, Housing and Urban Development Act 1993 you can serve a notice on any person receiving the rent on behalf of the immediate landlord to provide you with the relevant information.
To start a formal claim it is necessary to serve an initial notice under Section 13 of The Leasehold Reform, Housing and Urban Development Act 1993. There is no prescribed form for the notice but it must contain certain information and comply with the following:-
- It must be given by a number of qualifying tenants which is not less than half the total number of flats
- It must specify the premises and be accompanied by a plan
- Contain a statement of the grounds on which it is claimed that the premises are qualifying premises
- Specify the proposed purchase price
- State the full names of all the qualifying tenants in the building and their addresses (not just those participating in the claim)
- State the full name/s of the person/s appointed as the nominee purchaser and give an address in England and Wales at which notices may be given to that person
- Specify the date by which the landlord must respond to the notice (not less than 2 months after the date the notice is given)
- Be signed by each of the lessees giving the notice
The law in this areas is complicated, so we would always recommend having the notice prepared and served by a specialist solicitor. Having served an Initial notice it is a good idea to register the notice at the Land Registry. If the landlord sells the freehold to another party the notice will then be enforceable against the new purchaser.