It is the right, subject to qualification, for owners of flats in a block to buy their freehold. People often apply for enfranchisement to try and reduce their costs and take control of what they spend on the building long term. The relevant Act is the Leasehold Reform Housing and Development Act 1993 (as amended).
What has to happen to consider enfranchisement?
50% of the leaseholders have to meet the qualification criteria before considering going ahead. Once this is the case the qualifying tenants can participate. Unfortunately, the procedure is quite complex and it is vital to serve the correct notice on the landlord. So it is always advisable to use a specialist solicitor and surveyor when undertaking this process.
The first action must be to check that the building qualifies and that there are enough qualifying tenants to be able to proceed.
You need to check as follows:-
a) The flat contains at least two flats.
b) Qualifying tenants own at least two-thirds of the flats. Qualifying tenants are leaseholders that have a lease in excess of 21 years when first granted. This will cover most leases which are often between 99 to 125 years when they are first granted.
There are other leases which come within a definition of a qualifying tenant although these are a lot less common. These are as follows:-
a) A shorter lease which contains a clause providing a right of perpetual renewal.
b) A lease terminable on death or marriage or unknown date often called the Prince of Wales clause.
c) The continuation of a long lease under local Government Housing Act 1989 following the expiry of the original term.
d) A shared ownership lease where the tenants share 100 per cent.
e) A lease granted under the right to buy or right to acquire or on rent to mortgage.
Are there any exceptions to the above?
Yes, these are as follows:-
a) The landlord is a charitable housing trust that provides the flat as part of the charity function
b) The tenant owns more than two flats within the building. This is either jointly with others or solely in their own name. Please note where this applies these flats will be discounted from the two thirds.
c) The tenant has a business or a commercial lease.
Does the building have any restrictions when it comes to commercial use?
If more than 25% of the internal floor area of the building is for commercial use then the building does not qualify. The commercial restriction excludes common parts of the building. It could be shops or offices etc. Garages and parking spaces specifically used by flats in the building are classed as residential.
Does a residential landlord have an exemption?
There is no right of collective enfranchisement where:-
a) The building is a conversion into four or fewer flats and
b) Is not a personal block and
c) The same person has owned the freehold since before the conversion of the building into flats and he or an adult member of the family has lived there in the past twelve months.
Are there any other exceptions?
Yes, buildings such as a cathedral within a precinct or National Trust properties. Or where the freehold includes any track of operational railway including a bridge or tunnel or retaining wall to a railway track. Also, Crown properties which are mainly owned by the Government.
It is really important when starting the process of Enfranchisement to employ a solicitor. They are there to deal with all of the legal requirements with qualifying tenants. If this is wrong at any point then it can invalidate a notice and it is therefore very important to do it correctly.
Click here to read our previous article on how to organize an Enfranchisement.