Arcadia Law has acted for both Leaseholders and Freeholders in respect of the very complex area of collective enfranchisement and we are able to advise you in relation to the pros and cons in your specific matter.
There are many reasons why a group of leaseholders would want to buy the freehold of their property but one of the main reasons is to take over the management of their building. If there are changes you would like to make to the management of the building or you are dissatisfied with the way your freeholder currently manages the building, collective enfranchisement may be the solution for you.
This would also allow the leaseholders to grant themselves 999 year leases on their flats without having to pay the premium that would be payable under the statutory process. This may also make the flats more saleable as the leases in place will be long and the property will be sold with a ‘share in the freehold’
In order to qualify to collectively enfranchise, at least 50% of the leaseholders in the building must participate and each of those flats must have originally been granted a lease of at least 21 years. If there are only two flats in the building, both leaseholders must participate in order to qualify. In addition, at two-thirds of the flats in the building must be let to qualifying tenants and no more than 25% of the building can be used for commercial purposes ie as a shop or offices etc. The building must also be self-contained and we will be able to advise you on any further exemption which may apply in your case.
Unlike the statutory right to extend your lease, there is no requirement to have owned your flat for 2 years so this is another option available to leaseholders who do not qualify for a statutory lease extension.
In most cases, a company will be incorporated in order to purchase the freehold and this company is known as ‘the nominee purchaser’. Although incorporating a company is not always necessary, it is normally advisable as the freehold company will remain the same regardless of flats changing hands so only the shareholders of the company would change when any of the participating flats are sold. We can assist with the incorporation of the company and can advise you of the pros and cons of purchasing the freehold with a company rather than in your individual names.
The Nominee Purchaser will then serve the Section 13 Notice on its Landlord. This Notice will contain the terms for the acquisition of the freehold, including the premium payable.
Once the Notice is served on your Landlord, they will have a period of 2 months to respond with a Counter Notice which will include their counter proposals on the terms of the freehold purchase and the premium.
Both parties then have a period of 6 months to agree the terms of the freehold purchase and the premium and if this cannot be done, the matter will need to be referred to the First Tier Tribunal in order to have the outstanding matters determined. If neither party makes the application to the Tribunal before the 6 months period expires, and the terms of the freehold purchase are not agreed, the matter will be deemed withdrawn.
It is therefore very important that specialist solicitors are instructed to represent you as there are many pitfalls within the Leasehold Reform Legislation.
Once all terms have been agreed between the parties or determined by the Tribunal, the parties have 4 months in which to proceed to completion. The whole process can take between 6-12 months.
The premium payable is based on the principles contained in the 1993 Act but essentially is a combination of the following:
Arcadia Law regularly works with a number of experienced surveyors who also specialise in the area of Leasehold Reform and we are able to provide you with contact details of these surveyors if required. Your surveyor will be able to advise you on the likely premium payable to the Landlord and will work closely with us throughout the process.
Your surveyor will be able to calculate the share that each Leaseholder must pay and this will be based on the size, the value and the rent of the flats.
As with the Lease Extension process, you will be responsible for your own legal and surveyors fees as well as the reasonable legal and surveyor’s fees of your Landlord. Arcadia Law aims to provide their clients with a fixed fee which will be based on the individual facts of your matter.
If you are unable to purchase the freehold of your building under the 1993 Act, it may be possible to agree an informal arrangement with your Landlord for a set premium. Although this process may be more straight forward, there is still a separate process to follow and further details of this are set out under the information for Rights of First Refusal.
Our fees start at £1,500 plus VAT per flat for a collective enfranchisement claim for a relatively straightforward matter rising thereafter with purchase price and complexity. An example is set out below but all our fees will depend on the individual features of the purchase.
Up to 3 units- £1,500 plus VAT per flat
4-8 units- £1,250 plus VAT per flat
8 plus Units- Please call to discuss a bespoke quotation
Our handling charges for sending telegraphic transfer on completion (if there is more than one landlord, there will be 2 telegraphic transfers so this item and charge will appear twice) £40
Land Registry official copies: £3 per title
Unilateral Notice: £40
Courier Fees: £8 per address
The average collective enfranchisement claim takes 9-12 months.
Key stages of the collective enfranchisement process are typically:
