There is one important first step for leaseholders who are considering serving a notice on the freeholder. The leaseholders have to gather information on the people in the building and whether they will be qualifying tenants.
The leaseholders need to do this to ensure that the initial notice is correct and valid. Also to respond to any challenges from the landlord following the service of the initial notice.
The initial notice must be correctly served on the freeholder. It must include the correct information on the interest of the participating tenants.
There have been some cases where freeholder’s interest may be one or more different ownerships i.e. severed or flying freeholds. This does not in itself form any obstacle to enfranchisement. It just means tenants should be aware that they have to have the deed to the freehold of the property.
The Information Required
The leaseholders need to have certain information as follows:-
a) The full identity of the freeholder where it is a personal company name and address
b) Details of any intervening or head leases and identify the names and address of the relevant lessees.
c) Full names and addresses of the leaseholders of the building and details of their leases.
d) Details of any flats let through the landlord and let on a periodic tenancy
Where to find that Information
The leaseholders will already know some of this information.
Obtaining the remaining information is as follows:-
1) There are landlord and tenant legislation, enabling leaseholders to obtain details of the name and address of the landlord. The Landlord and Tenant Act 1985 gives this right. The freeholder must provide the information within 21 days of the request. It is an offence to not comply with this. The ground rent demand should also have the same details on.
2) Land Registry. The applying party has the entitlement to inspect the register and obtain copies of the entries relating to the freehold. The entry will provide the name and address of the registered owner. It will also provide details of any other interest of the freehold such as other freeholders, head lessees and mortgages. There is a small fee for copies of these registers. The land registry holds the registers. You can also obtain details of any leaseholders through this information as well.
3) Information Notice. Under Section 11 of the 1993 Act, you could serve the landlord with an interest in the property, requiring details of that interest.
The leaseholders can, therefore, request from the landlord certain details. These are details of any other freeholders, any intermediate leases, including the name and address of the lessees and the terms of the lease. The information notices can require sight of certain relevant documentation such as service charge. The recipient of these such notices has to respond within 28days.
Is there a right to take part?
There is no right to take part or right of invitation to join the freehold purchase. However, participating tenants may find it useful to ensure that all tenants are aware of their proposals. At present, though, there is no legal obligation to do so.
The initial notice
The initial notice triggers the statutory procedure for purchasing the freehold. The nominee purchaser is then liable for the freeholder’s reasonable costs from the date that the freeholder receives the notice. It is therefore absolutely critical that the notice is complete and contains no inaccuracies. These may need a correction via an application to the county court. This can be costly and could lead to a rejection of the notice.
There is protection for enfranchising tenants. They have the right to register the initial notice with the Land Registry. This provides protection for the company against the landlords’ sale of the freehold. Since any purchase of the freehold would subsequently be to the registration of the initial notice. The procedure will, therefore, be able to continue as though a new owner had originally received the notice.
The service of the initial notice also features the valuation date as the same date as the initial notice. The valuation date is the date upon which the variables affecting the price of the freehold are set. For example, the number of years left on the leases, the present value of the flat and their assured future value. Therefore however long the negotiation or the determination of the price. The valuation factors apply to the day of the service of the initial notice.
It is advisable to instruct a solicitor for the preparation of the service of an initial notice as they can be extremely problematical.
What if I have an absentee landlord?
If after all reasonable efforts the leaseholders cannot find the freeholder this should not prove to be an obstacle. There are other ways to find this information. However, these are all extremely complex and leaseholders should employ a solicitor to look into this. There are various options, the details of which would take too long in this article to outline.
Preparing for the subsequent procedures that need to take place
The landlord has the right to ask for evidence of the participating people and titles to their flat on receipt of the initial notice. It is a simple task of producing the official land registry entries providing they are all registered. The landlord has a period of 21 days after giving the initial notice in which to request the information. It must also be provided within 21 days of the request. In the event that a leaseholder is not registered the notice would be withdrawn with the costs payable to the freeholder. This is why it is so important to employ a solicitor who knows what they are doing as a specialist in this area.
Where the initial notice is withdrawn a new notice cannot be served again for another 12 months beginning on the date of the withdrawal. The landlord has the right to inspect the property. This includes the participating tenants’ flats subject to ten days’ notice to the occupier.
Can the landlord serve a counter-notice?
A landlord must serve his counter-notice by the date specified in the initial notice. This must be to either agree to the leaseholders’ purchase of the freehold and accept the terms or not agree to the right and give reasons why they do not. The freeholder can deny the right of enfranchisement due to having redevelopment plans or lease back proposals.
Redevelopment
The freeholder is not obliged to sell the freehold in the case of redevelopment. This is if plans to demolish and redevelop the whole or a substantial part of the building can be proven to the court. This can only apply where two-thirds of the leases in the building are due to terminate within a period of five years from the date of the service of the initial notice.
Leaseback
Where the freeholder owns a flat, or flats in the building, they have the option of taking a selection on the flat of a 999-year lease.
Where there is a lease back the value of the flat is deducted from the calculation. If an agreement cannot be reached for whatever reason then either party can apply to the Tribunal for an independent determination. You must ask your professional advisors on all relevant documentation that needs to deal with such an application.
If the freeholder fails to serve a counter-notice by the date specified in the initial notice, the participator may apply to the county court for a vesting order. This is an order allowing them to acquire the freehold on the terms of the initial notice. If the Court is satisfied with the right of transfer it will grant the order. The leaseholders must make the application to the Court within six months of receiving the counter-notice.
Strict procedures and time limits
There are very strict procedures and time limits as follows:-
1) Leaseholder to serve Section 11 information notice
2) Freeholder must respond within 28 days, leaseholders must make arrangements for a nominee purchaser and if forming a company register at Companies House. Participating tenants serve a section 13 initial notice. The valuation date is the date of the Section 13 notice.
3) Freeholder may request evidence of title of participating leaseholders but must do within 21 days.
4) The nominee purchaser must respond as requested within 21 days.
5) Freeholder must serve counter-notice by the specific date in the notice. This date must be at least two months from the date of the service of the initial notice. Where the freeholder failed to serve such a notice the nominee purchaser can apply to the court within six months for a vesting order
6) If the counter-notice disputes the qualification the purchaser must apply to the court within two months to argue their case.
7) If terms are not agreed after service of the counter-notice either party may apply to a Tribunal. This must be at least two months from and within six months, of the date of the service of the counter-notice. The Tribunal then lays out the details thereafter.
Summary
This type of law is so complicated. It is absolutely critical to employ some form of professional to advise and assist throughout the transaction. At least have a local valuer and/or solicitor that specialises in the right to manage and collective enfranchisement.
