Flats are generally sold leasehold for a fixed term length. Leaseholders of flats can join together to purchase the freehold of the property from the freeholder in certain circumstances. This is known as collective enfranchisement.
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In order to qualify, the various components of the situation need to meet certain requirements.
There are various criteria that the building and tenants need to meet:
If any of the following apply, then the tenant will be exempt:
There are certain situations that will exempt a landlord from
If the tenants meet the relevant criteria then it is advisable to enter into a participation agreement that will set out the expectations and actions of the various leaseholders, including:
The nominated purchaser
The start of the process requires the tenants to nominate the purchaser that will be named in the initial notice. The nominated purchaser will eventually acquire the freehold and become the new landlord, who is responsible for managing the building. This can be either a person, a trust or a company that is legally formed by the tenants just for this reason.
The property should be valued by a qualified valuer or surveyor so that the tenants have an idea of what the purchase price will be. Under the Leasehold Reform Housing and Urban Development Act 1993 (as amended) there is a formula that will be used to estimate what the leaseholders will need to pay to obtain the freehold.
Once the initial notice is served, this triggers the relevant procedure for collective enfranchisement and the nominated purchaser then is liable for the reasonable costs of the freeholder from that date.
The nominated purchaser should register the initial notice with the Land Registry to ensure they are provided with the available protection against the landlord selling the freehold to someone else. The valuation date is also fixed as the date of service of the initial notice.
The notice should include the following:
The landlord’s counter notice has to state either:
If the freeholder does not respond, then the leaseholder is give the right to buy the freehold on the terms stated in the notice.
In some situations, the leaseholders will not be able to find the landlord in order to purchase the freehold. This is not fatal to a collective enfranchisement. Where the freeholder is a company that is no longer trading then enquiries can be made through the Treasury Solicitor in case the property has passed to the Crown. If the freeholder is in receivership, then the person dealing with this will be acting landlord and should be approached. Where the freeholder cannot be found then the leaseholders can apply for a Vesting Order if they have made all reasonable efforts to find the freeholder (for example an advert in relevant newspapers). The court would then sell the freehold to the tenants at a price determined by the First-Tier Tribunal (Property Chamber), which is paid to the court.
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