Flat Owners’ Rights to Buy the Freehold
Collective Enfranchisement
Flat owners can force their freeholder to sell the freehold of the building to them. However, in order to do this, the flat owners must fulfil a number of statutory requirements:
1. the building must be self-contained;
2. no more than 25% of the building can be commercial;
3. the flats must have been let on long leases (i.e. 21+ years);
4. at least two-thirds of the flats must be long leases; and
5. at least 50% of the long leaseholders must take part.
It is sensible to get a valuation prepared by an expert surveyor as soon as possible. That way you can ensure that the participating flat owners will be prepared for the likely costs involved. We can recommend a local expert to you.
Once you have decided you want to proceed, it is important to get a Participation Agreement in place so that the participating owners are aware of their responsibilities and their financial commitments. It is also sensible to collect the majority of the necessary funds upfront.
The initial financial outlay will be recouped over the middle to long term. You will become the decision makers with regard to the building and can decide on future expenditure e.g. maintenance, decoration, insurance costs. In addition, you can extend your leases without paying a premium and remove the obligation to pay ground rent.
Generally, the time period depends on how the landlord reacts to the initial notice. Each case is different, but you should understand it could take as long as 18 months where the landlord disputes the claim or argues about the price. In the event that the terms cannot be agreed, then it can be referred to the Leasehold Valuation Tribunal to determine.
It is very important that you understand that the law is particularly complex and there are a number of statutory exemptions and restrictions.
You should note that there are other statutory rights available in the event that you are unable to proceed with this collective enfranchisement. These rights include an application for the right to manage and a right of first refusal and an individual right to a lease extension.
For more information and an indication of the fees involved, please contact Sally Peake on 01273 329797 or sally.peake@bunkers.co.uk.
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