About Enfranchisement
Roger Nelson FRICS, IRRV Managing Director of Each Side Leasehold and a full member of the Association of Leasehold Enfranchisement Practitioners ( ALEP) takes a closer look at freehold enfranchisement.
* “We have a crook as a freeholder”
* “We cannot sell our flat as the lease is too short”
* “We have asked the freeholder how much he wants for his freehold but he says we do not qualify”.
* “The managing agent is useless”.
* “We are being ripped off with our service charges”.
If one or more of these apply to you then collectively buying the freehold of the building together with the garden and grounds may be the best option. However if it were simply a question of control over management and charges then the law gives lessees a Right to Manage even if the existing arrangement is working well.
The existing market makes it even more important to make the property and its surroundings more attractive both physically and from the point of view of the legal tenure. As with lease extensions the same sand in the hour glass passes though with an inevitable conclusion of an increased enfranchisement price as the leases get shorter.
The main qualifying criteria are:
* The building must contain at least two flats
* At least two-thirds of the flats must be leasehold with an original term of at least 21 years.
* Where the building is mixed residential and commercial the residential part must be more than 25% of the internal floor area.
There are certain exceptions to qualification even if the above conditions are satisfied:
* Where the landlord is a Charitable Housing Trust and the flat is provided as part of the Charity’s functions.
* Where the building is within a cathedral precinct, a National Trust or Crown property.
* A leaseholder cannot join in if they own more than two flats in the building or where the lease is a business or commercial lease.
How many can take part?
Not every qualifying lessee need participate but as long as at least 50% collectively take part then the law gives them an absolute right to enfranchise. Also, unlike lease extensions you do not have to have owned the leasehold flat for two years before this right is given.
For leases which have less than 80 years to run valuers will want to know which flats are joining in the purchase and those who are not. This is because “marriage value” an amount reflecting the increase in the value of the flat following the purchase is added for those who take part since they will directly benefit. For those who do not take part a proportion of this is added as “hope value” in other words for the likelihood that they will at some future time either want to join in with the freehold or be given an extended lease by the new freeholders.
Here are tips for the unwary.
1. Do not underestimate the overall cost, this is particularly important for the collective freehold enfranchisement. Give your valuer all the information they seek and do not forget that buying the freehold can mean paying for things outside the leasehold such as income from mobile phone masts, the extra space in the roof, and the possible development in the garden all which would be reserved to the freeholder/landlord and for which he would seek compensation.
2. Costs include fees not only of your valuer and solicitor but also those on the other side although your professional advisors should be able to give you an idea as to the level of each. Fortunately the law does not give the other side the right to demand a blank cheque, they can only charge what is reasonable and then costs of negotiation and any tribunal are both excluded. Any disputes can be taken to the tribunal as well as the enfranchisement price.
3. I would recommend your solicitor serve a formal notice to protect your legal position and rights. This notice must be correctly drafted and this where you can benefit from valuers and solicitors experienced in such work. There are examples of where notices had to be re-served but in the meantime leases have fallen below 80 years and where the price has increased as a result!
4. Careful planning is needed as the whole process can last several months regrettably sometimes even years. Participants should not rely on verbal promises for funds otherwise the whole process could collapse if the “promised” payment is not made. A participation agreement drawn up with your solicitor is enforceable through the courts if necessary so that when people sign up they are legally obliged to pay the sums due.
I have been dealing with this area of work in London and the South East for the last 10 -12 years. I hope this of help but if you need further advice call free on 0800 902 0466 or e mail info@eslease.com
This is based upon our understanding of the law as at January 2009 as it affects valuations. If you need any clarification you should consult with a solicitor who practices in this area of work.
Roger Nelson
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