How to extend a lease on a flat or buy a share of the freehold
When you buy a flat you will usually buy it via a lease rather than buying it outright. This is because, when you own a flat, there needs to be a mechanism in place to ensure that everyone in the building occupies their space responsibly and contributes to the cost of maintaining and insuring shared areas.
A lease gives you the right to live in your home for a set number of years and may restrict what you can do with the property during this time. There will also usually be an annual service charge that needs to be paid, together with ground rent.
Many flat owners are happy to accept the obligations and restrictions that come with owning a property on a lease, but problems can arise where the amount of time left to run on the lease means that it is not possible to secure a mortgage or where a prospective buyer wants to own a stake in the building instead.
To address these issues, it is possible to ask the current owner to extend the length of your lease or to sell you a share of the freehold. This can be done by making an informal approach which may or may not be accepted, or via the statutory process of leasehold enfranchisement which in many cases may be a more attractive option, as Louis Mathers, residential property expert with Parnalls Solicitors in Launceston explains:
‘Leasehold enfranchisement enables the owner of a leasehold property to extend the term of their lease or to acquire a share of the freehold, and where there are other tenants keen to get involved it is possible to make an application for collective enfranchisement, a request for which cannot be refused where the relevant qualifying criteria are met. It is a complicated process, but one that can be worthwhile for those who want to increase the amount of say they have in the way their building is managed and who also want to increase the potential value of their home.’
How do I apply for collective enfranchisement?
Collective enfranchisement is only possible in respect of buildings housing at least two flats and where there are a sufficient number of qualifying tenants willing to participate. To be a qualifying tenant, a set of criteria must be met, the most frequently applied one being that each of the tenants making the application must have a lease that, when first granted, was for a period of more than 21 years.
Once you get over this hurdle, the next step is to appoint a nominee purchaser, which is usually done through a company formed specially for this purpose and which is run and wholly owned by the participating tenants.
After this you need to serve an initial notice on the current owner of the building advising them of the nominee purchaser’s wish to pursue collective enfranchisement. This notice must contain certain detailed information, including the price you propose to pay, which must be based on a valuation calculated in accordance with a statutory formula.
‘The notice requirements are complex and require specialist advice’, explains Louis. ‘Serving an invalid notice can result in the whole process collapsing and the tenants having to go back to square one.’
On receipt of the notice, the current owner may accept the proposed terms or make alternative suggestions. They could also choose to challenge your right to apply for collective enfranchisement, for example where they dispute that the qualifying criteria have been met.
Where agreement cannot be reached, it may be necessary to refer the matter to a property tribunal.
If your application is successful, the nominee purchaser will acquire the freehold to the building and will in effect become your new landlord. They will then be able to grant you and the other tenants individual lease extensions and, if agreed by the participating tenants in advance, consent to variations to your lease terms.
How much does collective enfranchisement cost?
The cost of collective enfranchisement depends on your circumstances, but you will need to budget for:
• the purchase price, or premium, you will have to pay to acquire the freehold;
• the participating tenants’ legal and valuation costs;
• setting up and managing the nominee purchaser company;
• granting lease extensions for individual tenants; and
• the landlord’s reasonable legal costs, which participating tenants are liable for.
These costs need to be balanced against the advantages of owning a share of the freehold and any increase in the value of your flat.
Do I need specialist advice?
Collective enfranchisement is a complex and technically challenging process. You need a solicitor with specialist knowledge to assist with your application, particularly when it comes to drafting the initial notice which may be rejected if it fails to comply with the necessary requirements. Your solicitor can also help to coordinate the steps that will need to be taken by the participating tenants, which may be challenging where significant numbers of people are involved.
They could, for example, help create a participation agreement which ensures that all participating tenants are fully committed to the process and will contribute their fair share of the costs. Provision could also be made for what should happen if you or one of the other participating tenants want to sell their property during the course of the enfranchisement process.
For further advice on leasehold enfranchisement, or any other residential property or conveyancing matter, please contact Louis Mathers on 01566 772375 or email email@example.com
Preparing to sell your Launceston property
Staying safer in video meetings
Making Sure Your Great New Home Comes With Clean Air
Property Market Re-Opens in England
Coronavirus: Wills and Powers of Attorney FAQ
Medical Care Received Not Up to Scratch?
Had an Accident in Someone's Home?
Accident or Injury Involving a Dog?
Social Distancing No Obstacle for Parnall's Mobile Document Signing Team
Coronavirus (COVID-19) and Commercial Property Legal FAQs
Rent Charge Suspensions: Protecting Your Interests
Been Asked to Sign an Employment Settlement Agreement? Seek Advice Urgently...
Services Update: Continuity of Legal Service Provision
Advising You in Uncertain Times
Could carelessness on social media land you in court?
Is an electronic signature on a commercial property document acceptable?
What happens when there is no health & care LPA in place
Social Media Training for Businesses
Information to gather for your probate solicitor
Gazundering, what it is and how to avoid it
Relief from forfeiture – what happens if the tenant forgets to pay the rent?
Not so safe at work - compensation for an accident at work
New organ donation law: giving you control
Running a business from home
Have nude photos of you or your teenager been posted online?
Landowners’ rights and the Electronic Communications Code
Building in your back garden
Christmas is a time for giving (and inheritance planning)
Buying the freehold of your leasehold house
Redeveloping an empty pub for commercial use
Why it takes time to obtain the Grant of Probate
Social Media: The unconscious privacy threat
Is your reputation being threatened?
Making a will after your spouse or partner has died
Interns celebrate completion of internship at solicitors
Selling your home in a flat market, some top tips
Claiming compensation for a serious road traffic accident
New Media and Communications Court list reflects surge in internet defamation claims by Laura Baglow
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
The risks of DIY probate
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Making a will when you retire
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Five problems with a leasehold property
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Valuing an estate for probate
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Have you had an accident involving a horse?
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.