Owners of flats are often at loggerheads with The Freehold owner either because they are an absentee landlord and do nothing for the building or alternatively because they charge exorbitant fees to the leaseholders for various services. It is possible, if certain conditions are met, to get rid of the freeholder / Landlord for good!
If you are a long leaseholder and unhappy with the current freehold arrangements it may be possible to purchase the freehold through the enfranchisement rights under the Leasehold Reform Housing and Urban Development Act 1993 (’the Act’).
Under this Act the holder of a long leasehold of a flat can acquire the right to buy the freehold.
This legislation provides a right for the enforced sale of the freehold of a building to a nominee purchaser of a group of lessees who represent at least half of the flats in the building. The benefits of exercising these rights potentially include:
- Securing long term investment in the property.
- Enabling lessees to take over building management allowing potentially more efficient and cost effective management
The requirements to purchase the freehold are quiet stringent, but if met it is an extremely valuable right allowing leaseholders to force the sale of the freehold to them
Qualifying Tenants – section 5
In order to be a qualifying tenant under section 5, the lessees need to own a long lease which is defined under section 7 of the Act. A leaseholder will not be a qualifying leaseholder if:
- The leaseholder owns more than two flats in the building – s5(5); and
- The leaseholder has a business or commercial lease;
- The landlord is a charitable housing trust and the flat is provided as part of the charity’s functions;
It is essential that there are enough qualifying leaseholders for a successful action. The minimum number of participating leaseholders must equal half the total number of flats in the building.
Building Requirements – section 3 and 4
In addition to seeing whether you are a qualifying tenant, the building has to meet certain requirements under the Act. These requirements are as follows:
- There must be a minimum of two flats in the building;
- At least two-thirds of the flats must be leasehold; and
- No more than 25% of the internal floor area is in non-residential use.
In addition, there is no right to collective enfranchisement as follows:
- Conversion of 4 or fewer flats which are not purpose built and where the same person has owned the freehold since before the conversion took place and he or an adult member of his family has lived there for the last 12 months proceeding the claim.
- Buildings in cathedral precincts, National Trusts properties and Crown properties are completely excluded.
Once this first set of criteria is satisfied it is then possible to explore purchasing the freehold title. Once the freehold title has been purchased by a nominee purchase it has various advantages. One main advantage is to enable the residents who participate to grant themselves long leases for a nominal price with a reduction or removal of ground rent. A second advantage although it does not apply in every case, is that the control of the management will be taken over by the tenants' nominee company.
Should you have any questions or queries please do not hesitate to contact Mark Bland or Tony Parkins on 0151 666 9090.