Are you considering whether it is a good idea to buy the freehold of your property? Freehold enfranchisement is a process that allows leaseholders to purchase the freehold of their property, granting greater control over its management and bringing other key benefits.
This is a complete guide for leaseholders, investors and property professionals interested in freehold enfranchisement.
We’ll uncover the complex process of purchasing the freehold of a property, explore the legal rights of leaseholders, and set out the steps involved in the collective enfranchisement process.
We’ve written this for:
Leaseholders interested in purchasing their property’s freehold
Property investors considering freehold enfranchisement
Legal professionals advising clients on leasehold enfranchisement
Property managers involved in managing collective enfranchisement
When you have finished reading this page, you’ll have a clearer understanding of the benefits and complexities of acquiring the freehold of your property. You may also be inspired to seek expert legal assistance to navigate the process more smoothly, quickly and cost-effectively.
Our freehold enfranchisement solicitors are on hand to answer your specific questions. We’ll guide you through the process of freehold enfranchisement saving you time and money and at the same time setting you up to flourish in your home, or letting you sit back and watch your investment grow.
Types of freehold enfranchisement
Under the Leasehold Reform Act 1967 certain leaseholders have the right to buy the freehold of their property. This right is known as freehold enfranchisement.
A freeholder, if you’re unsure, owns their own property and the land it is built on.
There are two main types of freehold enfranchisement:
Individual freehold purchase
Collective enfranchisement
Individual freehold purchase You may be able to buy the freehold of a property as an individual if you own a house.
Here are the legal requirements:
The building must be a house
You must have the whole lease for the house if it has been divided into flats
Your lease must have been for more than 21 years when it was first granted
You must be the current leaseholder and have had the lease for the past 2 years
If you own a flat you will need to buy a share of the freehold, this is collective enfranchisement.
Collective enfranchisement
Collective enfranchisement is where multiple leaseholders in a block of flats or a development join together to purchase the freehold from their freeholder or landlord. They may be the same person or different individuals. It was first introduced as a legal right under the Leasehold Reform Housing and Urban Development Act 1993.
A freeholder may be the landlord of a flat development, or another person or company.
Eligibility for freehold enfranchisement
The eligibility criteria for leaseholders seeking to purchase the freehold of their building include:
A minimum lease term of 21 years when you first took out the lease
You own the flat – shared ownership owners can only apply when they have ‘staircased’ to 100% ownership
Own a maximum of two flats in your building
The building must contain at least two flats
No more than 25% of the building can be used for non-residential purposes (offices, shops)
At least 50% of leaseholders must club together and agree to buy their freehold to make collective enfranchisement possible
Legal process for freehold enfranchisement
If you want to buy the freehold to your flat, you’ll first need to check you’re eligible. Then speak to your neighbours, they may have already clubbed together to buy the freehold to your building, in this case, speak to them about buying a share. Otherwise, ask your fellow leaseholders if they would like to join you to buy the freehold.
After you have made a pact with at least 50% of your building’s flat owners you can begin the legal process of buying the freehold.
Step 1: Initial valuation:
It’s essential to obtain a professional valuation of the freehold – this is a cost you will have to bear. This will ensure you get an accurate valuation from a surveyor, determine a purchase price and help you make a fair offer. The shorter a lease the more that purchasing the freehold will cost you. A good yardstick for estimating how much buying your freehold should cost is the amount extending your lease by 90 years will cost.
Step 2: Serving notice on the freeholder:
Serving the initial notice on the freeholder means letting them know of your intention to buy the freehold as a leasehold collective exercising its collective enfranchisement right. It is officially known as a Section 13 Notice under the Leasehold Reform, Housing and Urban Development Act 1993.
See this complete guide to Section 13 notices:
There is some key information that must be included in a Section 13 notice:
The full names and addresses of:
All the qualifying tenants
The landowner and or freeholder and any intermediary landlords
The nominee purchaser(s)
Rights required using marked plans– vehicle access, rights of way, access to drainage
The grounds for your claim – you have fulfilled eligibility requirements
Details of all the leaseholds that will be purchased
The purchase price for the freehold
The date by which a counter notice must be served, this must be at least 2 months after the Section 13 Initial Notice is served and no more than 6 months after
The signatures of the nominee purchaser/s and all the qualifying tenants at the end of the notice
Step 3: Negotiating the purchase:
Once the freeholder has agreed to sell, a negotiation process for the purchase will begin. The freeholder will respond to an initial notice with a counter notice, which outlines whether they agree to sell. If they do, it will set out what has been agreed and what remains to be decided.
If the freeholder does not respond to the initial notice or responds to it late, the leaseholders can buy the freehold on the terms set out in the notice.
When freeholders respond to an initial notice with a counter notice both parties will negotiate a price using the valuers they have appointed.
If issues remain unresolved the parties can attempt to settle their differences over mediation. Leaseholders can apply to First-Tier Tribunal (FTT) for a decision on any contentious issues within 6 months of the counter-response.
Step 4: Completing the purchase:
When the terms of acquisition have been settled by agreement or FTT the final steps in the freehold purchase process begin with the exchange of contracts. Before this point, the tenants that signed up for collective enfranchisement will need to accept the offer jointly in writing to the freeholder within two months. Then the qualifying tenants have two months to nominate a purchaser, this is often a company they have set up.
The freeholder is then given one month to send the nominee purchaser a contract who has two months to sign and pay a deposit.
Contracts will then be exchanged within seven days and completion will take place on the date agreed in the contract.
There are a few final pieces of paperwork to complete including transferring the freehold title to your name, and the registration of ownership.