Are you eligible to enfranchise?

publication date: May 16, 2008

Before you can successfully file for enfranchisement, it is essential you do your research to make sure your block is eligible. Nic Shulman deciphers between those that can, and those that can’t.

Collective enfranchisement was first introduced by the Leasehold Reform, Housing and Urban Development Act 1993 and it is the absolute right of leaseholders of 50 per cent or more of the flats in a block to buy the freehold of the building. Collective enfranchisement gives flat owners in a building total control over the property that they own. When leaseholders collectively own the freehold to the building they gain the power of self-determination regarding the issues in their block.

QUALIFYING CRITERIA:

For a building and its leaseholders to qualify for the right:
* It must contain at least two flats;
* At least two-thirds of the flats must be leasehold;
* It must not have more than 25 per cent of the internal floor area used for non-residential purposes
* It must not be a building within a cathedral precinct, a National Trust or Crown property

LEASEHOLDER QUALIFYING CRITERIA

A qualifying leaseholder must own:
* a lease that, when granted, had an unexpired term of at least 21 years; or
* a lease with an unexpired term of less than 21 years but with a clause providing a right of perpetual
renewal; or
* a lease terminable by death or marriage or an unknown date; or
the communication of a long lease under the Local Government Housing Act 1989 following the expiry of the original term; or
* a shared-ownership lease where the leaseholders’ share is 100 per cent.

EXCEPTIONS TO THE RULE

Even if a leaseholder satisfies one of the above conditions there are certain exceptions. For example they will still not qualify if they;
* have a landlord who is a charitable housing trust and the flat is provided as part of the charity’s functions; or
* own more than two flats in the building; or
* own a business or commercial lease.

In order to successfully enfranchise a block, a great deal of research and planning needs to be carried out. For example, lessees will need to know:
* the addresses of the freeholder(s);
* information about intervening or head leases (including contact details);
* contact details for all leaseholders in the building and details about their leases;
* information about any flats in the control of the existing freeholder and let on periodic tenancies.

Once it has been established that the building and its tenants qualify for and want to enfranchise there are a number of important stages to consider:
The participation agreement – advisable to conclude because the purchase of the freehold of a building is a cooperative undertaking between several people and each participating leaseholder is dependent on the other to perform.
The nominee purchaser – is the person named in the initial notice who will acquire the freehold and become the new landlord of the building. It is important to note that although the Commonhold and Leasehold Reform Act 2002 provided that the nominee purchaser would be a “Right to Enfranchise” company, these provisions have yet to come into force.
Funding the purchase – Collective enfranchisement can be a lengthy and expensive procedure. Before serving the initial notice, it is highly advisable the participating leaseholders seek professional advice from a valuer regarding the estimated cost of the procedure and establish a fund.
The initial notice – the process commences by the service of a formal initial notice on the existing landlord by the nominee purchaser. This triggers the moment by which all participating leaseholders are jointly and severally liable for their own costs and those of the landlord.
The counter-notice – this is the notice that must be provided by the freeholder in response to the initial notice. This must be delivered within the time limits set out in the law. By law, the freeholder cannot ignore the initial notice

FURTHER TIPS

Never underestimate the procedures, time limits and valuation requirements involved in Collective Enfranchisement.
While it is possible for the nominee purchaser of a group of leaseholders to administer this legal procedure through to conclusion, the vast majority of cases will require the services of an experienced solicitor and valuer.

Extracted from Being a Leaseholder – The Essential Guide to Owning a Flat by Nic Shulman. Order your copy today by calling 08700 600 663 or buy online at www.newsontheblock.com.

In the future News on the Block will be covering enfranchisement and lease extension on a region-by-region basis. Order your subscription today by logging onto the website as above, or calling our subscription hotline: 08700 600 663.