Leaseholders can opt for the collective purchase of the freehold of the block which is known as Enfranchisement. This can be particularly useful if leaseholders are unhappy with the freeholder’s maintenance and management arrangements for the block.
The 1993 Leasehold Reform, Housing and Urban Development Act, amended by the Commonhold and Leasehold Reform Act 2002 allows most leaseholders to purchase the freehold of their building. The conditions being:
- The building must have a minimum of two flats
- Purchase is not possible if the Freeholder lives in the building, which was originally converted by him and there are less than 5 flats
- The Leaseholders’ original lease terms must be greater than 21 years
- There is no minimum ownership period
- Leaseholders need not be resident
- At least 50% of Leaseholders must participate
- Up to 25% of the building floor area may be non-residential
It is often possible to achieve negotiated agreements without resorting to the prescribed notice process, as this can be expensive. In the event that the terms fail to be agreed the legal notice process is still available.
You will need to instruct a surveyor to carry out an Enfranchisement Valuation. A surveyor will establish the likely cost of purchasing the freehold and then a solicitor needs to serve the appropriate notice on the freeholder.
What does it the cost?
- The value of the ground rent income
- The value of the Freeholder’s reversion at the end of the leases.
- 50% of the ‘marriage value’. Marriage value is the increase in value when the Freehold and Leasehold interests are combined or ‘married together’.
- The leaseholders would cover the landlords reasonable legal, Surveyors costs and Stamp Duty.