Legislation
The right for leaseholders to join together and buy the freehold of a building from their freeholder (landlord) is set out in the Leasehold Reform Housing and Urban Development Act 1993.
In the law, this right is called ‘collective enfranchisement’.
Qualification
To qualify, you and your building have to fulfil certain conditions.
To qualify as a leaseholder:
- you must have a ‘long lease’, meaning it was at least 21 years when first granted
- you have ‘staircased’ (bought more shares in your home) to 100% if you are the leaseholder of a shared ownership property
- you must not own more than two flats in the building
For details of other less common leases which may qualify, please see our associated advice guide.
For your building to qualify, it must:
- be self-contained, or if it is part of a larger building, it must be possible to divide it vertically from the rest, without reliance on services from the remaining part
- have at least two flats and at least two-thirds of the flats must be owned by qualifying leaseholders
- not have more than 25% of the internal floor area, excluding common areas, in non-residential use, such as for shops or offices
- have participating qualifying leaseholders in at least half of the flats
Exceptions to the right to buy the freehold
There are some exceptions to the qualification rules.
You cannot buy the freehold if you have a resident landlord and all of the following apply:
- the building is a conversion into four or fewer flats
- the building is not a purpose-built block
- the same person has owned the freehold since before the conversion took place
- that person, or an adult member of their family, has lived there for the past 12 months
You also cannot buy the freehold of:
- buildings within a cathedral precinct
- National Trust properties
- Crown properties (but consideration may be given on a case by case basis)
- a property including any operational railway, such as a bridge, tunnel or track
Property included in the claim
When you buy the freehold, it includes:
- the building containing the qualifying leaseholders’ flats
- any premises and or/area belonging to or usually enjoyed with the flat, such as garages, outhouses or garden
- property which you are entitled to use under the terms of your lease, such as communal gardens, driveways, sports facilities (but the freeholder has the option of granting equivalent rights over such common areas rather than transferring the freehold
USING A SOLICITOR AND SURVEYOR
When you and the qualifying leaseholders of at least half the flats in the building are ready to proceed, you will jointly need to instruct a solicitor and surveyor to act for you. This is not a legal requirement but is advisable due to the complexity of the process and the importance of a proper valuation.
The surveyor calculates the price payable (premium) to be used in the application to buy the freehold.
The solicitor advises you on the best way to purchase the freehold. This is usually via a company set up for this purpose, with the participating leaseholders as its members.
The solicitor may also suggest drawing up a ‘participation agreement’ between leaseholders, a legally binding document setting out the terms of the purchase. It may cover how you each contribute towards the premium and other costs.
The Procedure
Your solicitor begins the procedure by serving the freeholder with a notice that states the proposed purchase price, the property concerned, and any other terms.
The freeholder has 2 months to reply in a ‘counter-notice’. This will say whether they:
- agree to your right to buy the freehold and your terms
- agree to your right to buy but with different terms – which will give you 2 more months to come to an agreement, and then 4 further months in which either of you may also apply to the tribunal to rule on the terms, where there is no agreement
- do not agree that you have a right to buy the freehold – which will mean you will have to apply to the county court for a decision
If either party applies to the Tribunal, they will make a decision after hearing evidence from both parties, normally valuation evidence from their surveyors, as most disagreements are on the price.
Once terms have been agreed or the Tribunal has made a decision, the parties must enter into a contract within specified time limits. If the time limits are not met, a party can apply to the County court to force the other side to enter into the contract.
Costs
You and the other participating leaseholders have to pay the freeholder’s reasonable legal and survey costs as well as your own.
Each party pays their own tribunal costs, if it gets that far.
The tribunal can also rule on the reasonableness of the landlord’s costs.
