The right provided by the 1993 Leasehold Reform Act (as amended) is for the enforced sale of the freehold of a building and lands, to a special company set up by the leaseholders – the Right to Enfranchise Company (the RTE Company).
The formal procedure for Collective Enfranchisement is started by the service of the initial Notice on the landlord; it then follows a prescribed route. Although this is the beginning of the statutory procedure the service of the notice should follow a period of preparation to ensure that the participating leaseholders are fully equipped to complete their application.
The right to purchase the freehold may only be exercised by a Right to Enfranchise (RTE) Company. At least 50% of qualifying leaseholders must participate. Where there are only two flats in the building both leaseholders must participate.
Qualifying as a leaseholder
A qualifying leaseholder must hold the property under:-
- a lease in excess of 21 years
- a shorter lease which contains a clause providing a right of perpetual renewal
- a lease terminable on death or marriage or an unknown date
- a statutory tenancy arising from the leaseholder having held over at the expiry of a long lease
- a shared ownership lease where the leaseholders’ share is 100%
* The present unexpired term is not relevant, qualification is governed by the original term of the lease when first granted.
But, even if the leaseholder satisfies these criteria he or she will not be a qualifying leaseholder if any of the following cases apply.
- the landlord is a charitable housing trust and the flats are provided as part of the charity’s function
- leaseholders who own more than two flats in the building
- business and commercial leaseholders
there must be a minimum of two flats in the building
no more than 25% of the internal floor area to be in non-residential use
There is no right of collective enfranchisement (but there is a right to renew the lease) where:
* the building is a conversion into four or fewer flats and not a purpose built block
AND the same person has owned the freehold since before the conversion of the building into flats
AND he or an adult member of his family has lived there for the past twelve months.
How much will the freehold cost
An initial valuation of the property by a qualified valuer or surveyor is strongly recommended in order to provide enfranchising leaseholders with an idea of the final purchase figure prior to commencing the action.
In considering the likely purchase price, the leaseholders’ liability for the landlord’s costs should also be borne in mind. The eventual cost to each leaseholder will be the share not only of the cost of the freehold but also of both the landlord’s and leaseholder’s legal and valuation costs.