Lease enfranchisement is a method used by leaseholders to gain more control and add value to their properties. The process can be undertaken by leaseholders of houses and flats.
The right to lease enfranchisement only applies to “qualifying tenants” who hold leases with a term of 21 years or more.
Leaseholders who qualify for lease enfranchisement are able to buy the freehold of their property together with any common areas such as gardens and parking areas they have the right to use under their lease.
Leaseholders who own three or more flats in the building will not qualify to purchase the freehold.
In order for a leaseholder of a flat to qualify for lease enfranchisement the building must:
- Be an independent building or be a part of a building which is capable of independent development;
- Contain two or more flats held by qualifying tenant; and
- Have at least two thirds of the flats held by qualifying tenants.
A building will not qualify for lease enfranchisement if:
- It comprises of four or less units and has a “resident freeholder”;
- More than 25% of the internal floor space is used for non-residential purposes; or
- It is part of an operational railway.
Information as to whether a building qualifies for lease enfranchisement can be ascertained from landlords or managing agents.
The first step of a lease enfranchisement is to serve an initial notice outlining information regarding the building, the leaseholders, the price to be paid and the name of the person/company which is to hold the freehold. The notice should also outline a response date.
The freeholder would then usually serve a Counter-Notice which is typically followed by a period of negotiation as to the terms of the agreement.
There are a number of advantages to purchasing the freehold of a building.
- Leaseholders can grant themselves new leases to extend the length of their lease.
- New leases can be used to correct anomalies in current leases which make them difficult to sell.
- Leaseholders can gain control of the management of the building.