Professional / Collective Enfranchisement London

Collective enfranchisement is a statutory right for qualifying tenants in a purpose-built or converted block of flats to purchase their Freehold, subject to certain qualifications.

Below is some information and advice about collective enfranchisement in London. For further information and advice, please contact Currell estate agents in London, and one of our experienced staff will be happy to answer any questions you have.   

The Rights of Leaseholders

According to the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002), a group of leaseholders may be entitled to apply to the freeholder of their building to purchase. This is the process known as ‘collective enfranchisement’.

To qualify for collective enfranchisement, you must fulfil the following criteria:

• The building you wish to purchase must be independent or part of a building capable of independent development
• The building must contain two or more flats, with a minimum of two-thirds of the total number of flats held by qualifying tenants. Leaseholders become qualifying tenants by holding leases that were originally granted of more than 21 years
• Qualifying tenants cannot own more than two flats or hold a commercial lease.

Buildings do not qualify if:

• They comprise 4 or less units and have a resident freeholder who converted the building
• The building is above a railway line
• More than 25% of the internal floor area of the building is used for non-residential purposes, for example, as a shop or office. (Resident's parking spaces are not included in calculating this floor area.)

Though this is not a fully comprehensive list of requirements, it suggests a number of eventualities for collective enfranchisement. If the leaseholders do not fulfil the above requirements, they may still wish to apply to the freeholder, but only outside the terms of the 1993 Act.

Procedure for Enfranchisement

Collective Enfranchisement is not an overtly complicated process, but the stages may include:

• Prior to making a claim, tenants usually enter a ‘Participation Agreement’ before preparing the formal Notice. This is done by solicitors
• Once the notice has been served, the landlord serves a counter-notice within two months
• A period of negotiations then follows. If an agreement cannot be reached, it is referred to the Leasehold Valuation Tribunal

• Whether it is by negotiation or by determination of the courts, the freehold purchase is then completed (usually about two months after agreement or determination of the price).

The Enfranchisement Price is broadly based on the investment value to the Freeholder, together with 50% of the marriage value and compensation for any other loss.

Collective Enfranchisement Costs

The cost of buying the freehold will be made up of the following costs:

• The freeholder’s loss of ‘ground rent’ – the income from the flats
• The freeholder’s loss of ‘reversion’ – the entitlement to the building at the end of the existing leases
• 50% of the marriage value - the increase in the value of the property, arising from the leasehold and freehold interests being combined. (Please note: marriage value is not payable when the applicants un-expired lease term is 80 years or more)
• The freeholder's valuation and solicitor's costs, and stamp duty.

Currell estate agents in London can provide you with further advice on the costs and processes involved in Collective Enfranchisement. Please give us a ring or come into our office at 309 Upper Street, Islington, London N1, and our staff will be happy to assist you.