Buying the freehold

A Row Of Victorian Sandstone Flats In Residential Use In The UKCan I buy the freehold of my property (Leasehold Enfranchisement)?

Leaseholders can buy the freehold of the building or part of the building in which the property is based, either on their own for houses or with other leaseholders (collective enfranchisement) for a block of flats. They can also buy the head lease, if their lease is part of someone else’s lease, or extend their lease.

Collective Enfranchisement

Leaseholders of a block of flat can collectively buy the freehold or a head lease of their building, if the building has two or more flats and at least two-thirds of the flats are owned by qualifying tenants. To be a qualifying tenant, you must:

  • have a lease which was originally granted for a term of more than 21 years (long lease)
  • not own more than two flats in the building, either jointly with others or on your own

You cannot be a qualifying tenant if you hold a business lease or the landlord is a charitable housing trust and the flat is provided as part of the charity's functions.

The building will not qualify for collective enfranchisement if:

  • there are four units or less
  • the freeholder lives in the building
  • more than 25 per cent of the internal floor space (excluding common parts) is used for non-residential purposes, such as offices or shops
  • the building is part of an operational railway
  • the building is a Crown or National Trust property

How do we make a claim to buy the freehold or head lease?

If the building qualifies, the minimum number of tenants participating in the purchase is half the total number of flats in the building. So, for example, where there are twelve flats in a building, at least six of the flats of qualifying tenants must take part.

The first step is to serve an initial notice on the freeholder, after all the participating tenants are fully informed enough. This will usually involve setting up some kind of structure, such as a company, to deal with all the participating tenants. The tenants should appoint a nominee purchaser, either an individual tenant or company, who will negotiate with the freeholder and buy the freehold on their behalf.

You will also need to:

  • find out the cost of the acquisition by carrying out a valuation
  • think about how to fund the purchase, for example, whether some participating tenants may need and can get a mortgage from their bank or building society
  • find out about what tax you may have to pay, both as purchasers and as freeholders

The initial notice should state:

  • the details of the property to be acquired, supported by a plan, otherwise the notice may be invalid
  • full names and addresses of all the qualifying tenants in the building and not just the participating tenants
  • the price being offered for the freehold
  • the name and address of the nominee purchaser
  • the date by which the freeholder is to give his counter-notice

Once you have served the initial notice, the freeholder must serve a counter-notice either:

  • agreeing to your right to the freehold and accepting your terms
  • proposing alternative terms
  • rejecting your right to enfranchise and explaining why, which will have to be resolved in the county court
  • stating that an application is to be made to court for an order that the right to enfranchise cannot be exercised because the freeholder intends to redevelop the whole or a substantial part of the premises, or
  • specifying any leaseback proposals

If, after two months following the date of the counter-notice, there are terms, such as the price that cannot be agreed, both the tenants and the freeholder can apply to the Leasehold Valuation Tribunal.

If the freeholder failed to serve a counter-notice by the specified date in the initial notice, you may apply for a vesting order from the county court. This will allow you to claim the freehold on the terms of your initial notice, as long as the court is satisfied that you have a right to buy it. You will need to make the court application within six months of the deadline for the freeholder’s counter notice.

What is Right to First Refusal?

If the freeholder wishes to sell his ownership of a building containing flats, where leaseholders have the right of first refusal, the freeholder must first offer to it to the leaseholders before offering it on the open market. The freeholder will need to serve formal notices letting the leaseholders know about his intentions and must give enough time to consider the offer.

During that period, the freeholder can neither sell nor offer to anyone else at a price less than the price proposed to you or on different terms.

A breach of the leaseholders’ right of first refusal is a criminal offence. If the freeholder of your property sells their interest without giving you the right of first refusal, you can serve a notice on the new owner demanding details of the transaction, including the price paid. You can then take action to force the new owner to sell to you at the price they paid.

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