Leasehold Enfranchisement of Flats
If you own a flat in a property, you will generally have a lease of the flat and there will be a landlord who owns the freehold of the whole building.
The landlord is usually responsible for maintaining the fabric of the building and the common parts and the leaseholders pay a contribution to the costs.
Unfortunately relations between the landlord and the leaseholders can sometimes breakdown and there are therefore various ways the leaseholders can take over control of the building.
One way is to set up a management company and take over the management of the building. That still leaves the freeholder owning the freehold which can still cause problems when it comes to renewing leases, etc.
Another route is for the leaseholders to buy the freehold. That can be done by agreement in the usual way any property is bought but that of course relies on the landlord wanting to sell and the landlord will of course only do that if the price is right for the landlord.
For that reason there is a statutory route which can allow the leaseholders to buy the freehold even if the landlord does not want to sell and which provides a mechanism for fixing the price.
This is governed by the Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002).
The Act allows qualifying tenants to force the sale of the freehold. There are legal requirements as to the make-up of the building and the number of tenants and the Act specifies the process that must be gone through in order to assert the right.
This involves setting up a ‘nominee purchaser’ (usually a limited company owned by the participating tenants).
The nominee purchaser gives notice to the Landlord setting out an offer to buy the freehold. The Landlord must then respond within a specified period either accepting the offer or making a counter-offer. The Landlord can also dispute the right to use the process on various grounds and/or require the tenant’s to prove their title to the qualifying flats.
Assuming the landlord does not dispute the right, the parties will then try and negotiate a price. If that cannot be agreed, either side can take the matter to a Tribunal.
If the landlord does not respond within the required time, the tenants can apply to the Tribunal for an order allowing them to purchase the freehold on the terms set out in the initial notice.
If you are interested in acquiring the freehold of your property or if you are a landlord who has been served with an ‘Initial Notice’, please contact us for assistance.