Collective enfranchisement is a legal term for the right of leaseholders to jointly acquire the freehold of a building, or part of a building, in which they hold a residential leasehold interest.
Leaseholders will have the right to acquire the freehold from their landlord where they satisfy the qualifying criteria and where the legal claim process is followed. This process can seem quite cumbersome, we at Connaught’s assist our clients in the enfranchisement process from start to finish providing up to date advice and guidance in doing so
Do you have a right to collective enfranchisement?
The right to collectively enfranchise applies where a self-contained building (or part of a building) contains at least two flats, the floor-space of the building does not comprise 25% or more non-residential space (such as shops or offices) and at least 2/3 of the flats are owned by qualifying tenants. To exercise collective enfranchisement rights at least half of the leaseholders are required to participate.
What is a qualifying tenant?
To qualify for the collective enfranchisement rights a leaseholder must have a long residential lease (being a lease that was granted for a term of at least 21 years when first granted). If the lease was originally a shared ownership lease, to qualify as a long lease the owner must have “staircased” up to 100% ownership.
A leaseholder will no longer be classed as a qualifying leaseholder if they own more than two flats in the building.
How do I Exercise my Right to Collective Enfranchisement?
Our solicitors at Connaught’s will advise you on whether the right of collective enfranchisement will apply, and if so we can represent the participating qualifying leaseholders throughout the claim process. Meanwhile, a surveyor will be able to advise on the premium (i.e. the price that the leaseholders should pay for the freehold) to put in the formal application to the freeholder.
The Process:
There is a set process for enfranchisement that has been established by law.
- Once the initial advice has been taken a formal application can be served on the freeholder. This will state that the collective enfranchisement rights are being exercised, and confirm the price that the leaseholders are willing to pay for the freehold.
- Following service of this initial notice, there is a 2 month period in which the freeholder can serve a counter-notice stating whether they accept the claim, and if so, whether all of the terms in the initial notice (including the price) are agreed. If any terms are not agreed there is a further 2 month period in which the leaseholders and the freeholder can negotiate terms.
- Where agreement is not reached, there is a further 4 month period in which the freeholder or the leaseholder may apply to the relevant tribunal for them to make a decision on the claim. Negotiations can continue within this time.
- If an agreement cannot be reached, and if the matter is referred to the tribunal, they will make a formal decision on the terms on which any enfranchisement claim should proceed. Following the determination of the tribunal in favour of the enfranchisement, both parties should enter into a formal contract for the sale of the freehold and then proceed with the sale and purchase transaction.
When exercising these rights, leaseholders should be aware that they will be responsible for both their own legal and surveyor’s costs as well as the reasonable legal and surveyor’s costs of the freeholder. Should the matter be referred to the tribunal, each party will be responsible for their own costs from that point.
