Lessees often don’t understand that leasehold enfranchisement is very simply a name given to the process in which lessees can, in circumstances carried out by their freeholder or acquire a new lease through a lease extension from their landlord.
Buying the freehold is often known as collective enfranchisement and under the leasehold Reform Urban Development Act 1993 tenants have the right to acquire the freehold of their building subject to certain exclusions.
If I already own the flat then why would I want to buy the freehold?
If you own a lease you don’t not necessarily own the flat. Leasehold and freeholds are completely different. When you buy a flat you buy a lease, you buy the right to stay at the property for a period of time normally 99 years or 125 onwards. You will often find that these are sold on over a period of time and each year the term comes down. So for instance, if the lease was granted in the year 2000 and you looked at your lease in 2019 it would only have 80 years left. When the lease gets to an 80 year period most mortgage lenders will want you to extend the lease itself. This is normally known as a lease extension and there will be a cost to it. It is therefore important that you may wish to consider either buying the freehold through enfranchisement or going for a lease extension.
Are there advantages of owning a freehold? The main advantage of buying a freehold is not only that you can extend your leases but you can also reduce your ground rent to a peppercorn. It allows you to give you control of the building. Is your freeholder charging you more money for insurance, repairs and any other outgoings that you are able to reduce so that your month to month outgoings will be less? We could help you with insurance and would be more than happy to give you a quote at any time.
Is there a qualification for the Enfranchisement? Yes, there is a complicated process to go through and it is important that you employ a solicitor to deal with this.
When will I need to insure the property under Enfranchisement?
When you are purchasing a freehold the insurance needs to be in place from exchange of contracts. You will then on completion be dealing with the insurance on a day to day basis. We can insure all of the property for you and make sure that you get the best possible cover at the lowest price. Again we can provide a policy that can start immediately with payment received within the first 14 days.
What are we responsible for insuring?
You will need to insure the whole building. This will include the bricks and mortar, roof and foundations. There may be a certain amount of contents in the common areas such as hallways which will need to be included. Each flat owner would need to insure their own contents separately. There will be an insurance for third party liability i.e. where something falls off the building and hurts or injures somebody. It is important that you are aware that as a freeholder/manager you are responsible for insuring the building on a comprehensive basis.
Insurance may also include the provision of alternative accommodation, loss of rent, legal fees and fixed cover as well as subsidence.
You may also need Directors and Officers insurance. The funds for this cannot technically come out of the maintenance account but it is something that you should speak to a solicitor about. This should be paid by the shareholders of the Right to Manage Company or enfranchised individual. We can do a price to include this or alternatively have it as a standalone policy.
I have received a copy of the insurance from the freeholder and it has a declared value and building sum insured on the policy. What is the difference between the two?
Declared value is the value of the bricks and mortar. It covers everything fixed to the property including fitted kitchens and bathrooms from the day the policy starts. This is the most important figure.
The sum insured figure is always higher than the declared value. This is to cover the cost or rise in building materials or inflation in the period of insurance.
If your policy shows a building declared value and a building sum insured, then the policy itself includes an allowance for inflation. This means that from the day your policy starts to the day of potential claim it takes into account any sudden rise in inflation, building materials and labour costs directly affect the declared value. So, the percentage increase in the building sum insured ensures that the building is never underinsured.
Do I need to get a valuation of my property for the insurance to ensure that the figure is correct?
We have a company Rebuild cost assessment Limited who are able to give you a desktop valuation of your property for a very small amount.
Buildings should also be insured for the amount it would cost to rebuild them. However, fewer than one in ten household properties in the UK are covered correctly.
If you are over-insured you are probably paying too much for your building insurance. If you are underinsured, you face a reduced payout in the event of a claim. Insurance claims can be reduced by hundreds or thousands of pounds due to under insurance.
Getting someone to visit your property to carry out a professional assessment can be time-consuming and very expensive. However, thanks to our partnership with Rebuild cost assessment.com we can offer you a reliable low-cost service from “regulated by RICS” the Royal Institute of Charted Surveyors organisation.
You will receive a Comprehensive Rebuild Cost Assessment (RCA) report guiding you on how much you should insure your building for.
Don’t be frightened in relation to insurance. We are here to help and we are not a call centre so you will speak to the same people on a regular basis.
- Our mission is to ensure that we provide you with a fantastic service and we can do the following:-
- Flexible payment terms
- Transparency of all our costs including commission so no hidden charges
- An unrivalled reputation for customer service
- Comprehensive cover including Directors and officers liability (DO)
- Low cost insurance that doesn’t compromise on cover (LC)
- Individual policies to suit individual requirements
- An understanding of Right to Manage and Enfranchisement from our staff (RME)
- Quality and commitment to excellence (QC)
- Synergy with our clients to ensure they have no surprises within their policy
Please do not hesitate to contact us.