Collective enfranchisement is the term given to the process when owners of flats in a building wish to purchase the freehold.
One of the main reasons why tenants are keen to acquire the freehold is to be able to vary their leases and particularly to extend the number of years remaining. Generally speaking, a lease with less than 80 years left remaining has a depreciatory effect on its market value. Potential buyers may be put off by the shortness of the term, or want to pay less for the property by reason of it. Lenders may be deterred from taking the property as security for a loan. When a freehold is acquired, tenants who have participated in the process can agree to vary their individual leases for nothing.
By acquiring the freehold tenants can take control over the way the building is managed. They can say what repairs are carried out, when they are done and at what cost.
Lessees in a large block of flats enjoy economies of scale if they work together. Often, the price for the freehold is less than the total price to extend each lease in the block. Tenants wishing only to apply for a new extended lease will have to bear the cost of the process by themselves. Expenses are shared when tenants join to buy the freehold.
The price paid for the freehold comprises three elements; the market value, one half of the marriage value, and compensation if applicable. It is recommended that, at the outset, tenants instruct a Valuer to report on the “lowest and highest” valuations. The tenants will also be obliged to pay the landlord’s “reasonable” legal costs in addition to their own. However, in the long term, tenants will benefit by being able to extend the length of their leases, thereby increasing the market value of their flats.
Buying the freehold through a management company has advantages compared with purchasing individually. Each flat will have a £1 share in the company and issued with a share certificate. Directors and a secretary of the company will be nominated amongst you. Officers can rotate. Meetings will be held at regular intervals to discuss management issues. Accounts must be prepared and filed at Companies House. Setting up a management company is the only practical way that tenants can manage a large block of flat. However setting up is simple. You approach a company that specialises in company formations and buy an “off the shelf” company. There is nothing to prevent the company appointing an outside agency to run the block on its behalf. When a company is set up and a tenant later sells their flat, they will hand over their share certificate to the buyer.
It is important at the outset to agree how the team works. A participating agreement can be prepared that deals with, amongst other things, how decisions are reached and costs shared, and what happens if tenants pull out of the process before it is completed because, for example, they sell up and move on.
You must be a qualifying tenant. You cannot be a qualifying tenant if:
Your building does not qualify if:-
If you are a qualifying tenant, you can only buy the freehold with a group of other qualifying tenants if your building satisfies the following criteria:
Trap 1 - failure by the tenant to complete the freehold purchase within four months of reaching an agreement after service of a notice and counter notice
If the terms are agreed and no binding contract has been entered in to by both parties, the lessee has four months from the date the terms were agreed to apply to the county court for a vesting order if the landlord delays completing on the agreed terms. If the landlord fails to complete on the agreed terms within four months from the date all the terms are agreed the lessee’s notice is deemed to be withdrawn, unless an application for a vesting order is made prior to the four months period.
Trap 2 - failure by the landlord to serve a valid counter notice within two months
Whilst the lessee can serve another notice if the first is invalid, the landlord does not have this protection so it is crucial that the counter notice is valid. Where the counter notice is invalid a lessee has a right to apply to the county court for a new lease extension on the terms set out in his section 42 notice or where an application to acquire the freehold was initiated by a section 13 notice apply to the court for an order determining the terms on which it is to acquire the freehold in accordance with the proposals contained in the initial notice. Following the case of Willingale v Globalgrange Limited the Court of Appeal has found that where a lessee can establish their statutory right be it for a lease extension or to collectively enfranchise the court must make an order in favour of the leaseholder. The effect of serving an invalid counter notice has serious consequences for the landlord, however the lessee must respond as the law provides if they want to take advantage of the position.
Trap 3 - failure by the tenant to apply to the Leasehold Valuation Tribunal to determine the terms of the acquisition within six months of the counter notice
Where a counter notice is served by the landlord admitting the tenant’s right to the freehold but disputing the terms, the tenant must apply to the Leasehold Valuation Tribunal to determine the terms of the acquisition within six months of receipt of the counter notice. Failure to make an application will result in the tenant’s notice of claim being deemed as withdrawn. The consequence of deemed withdrawal for a lessees are that not only will they be responsible for their own legal and third party costs but also the reasonable legal and third party costs of the landlord and will have to wait twelve months before they can start the process again.
Trap 4 - failure by the tenants to apply to the court for a vesting order
Where no counter notice is served by the landlord or he serves an invalid notice, an application to the court must be made by the lessee no later than six months after the date by which the counter notice should have been served. Failing which the lessee’s notice is deemed to be withdrawn, unless the parties agree the terms and complete the transaction without having to go to court.
Absolutely great service, professional and efficient. I would highly recommend Ian Fraser and Alison Allen. 5 star
Extremely professional, attentive to my needs and quick resolution to all issues that arose throughout my purchase.
They carried out the conveyancing thoroughly and efficiently and appreciated the fact that they always made time to see me and address my concerns. I would be very happy to work with them again and already highly recommend them.
I have been a client of Stennett and Stennett for a while now and have always found them professional, efficient, understanding and caring. Michael Stennett in particular has advised and helped me in dealing with the administration of the Power of Attorney for both my parents and has always gone out of his way to provide a friendly and attentive service. I would not hesitate in recommending them to friends and family and will always use them in any future legal transactions when I need legal advice.
Without hesitation I can say Stennett & Stennett kept me well informed by periodic updates about the progress of the estate, and what options were available and advised accordingly but always asking what i wanted to do .His services were definitely efficient and courteous
I was seen on time and the service was very good.
All the members of Stennett & Stennett have been very friendly & efficient since we first started using the company quite a few years ago. They have recently dealt with, what could have been, a tricky situation very successfully & we are very happy with the outcome. We will continue to use their services.
As always Stenett's have given us professional, supportive and helpful service. Thank you very much. The professionalism of all Stennett's staff far outweighed that of the other solicitors in our conveyancing chain.
We received very professional and fast service from Stennett & Stennett right from the first phone call. I called in and asked for a particular service for which I was put through to the right person straightaway. Debbie was very knowledgeable and offered us to come in for a free of charge consultation with a solicitor, which we did. During that meeting with Mr Stennett he arranged for the right documents and forms to be sent to us and made another appointment to come in and sign the prepared contracts. That's it! Many thanks.
A big thank you to Stennent & Stennent Solicitors, for helping my 94 years old Auntie to move into her new retirement home. They were very kind and considerate towards my Auntie and explained everything very clearly to her. With their calm attitude and approach it avoided any stressful feelings for her. I strongly recommend you use their services. Thanks again Stennent.
Always contactable by either phone or email.
S&S offices have a calm atmosphere and on the telephone. I had clear legal advice which was completely accurate and down to earth. This helps when to go to a solicitor, sometimes in a state of unknowing and worry. I had quite severe concerns, things did go wrong and I found the atmosphere of calmness and in going forward toward solving matters reassuring.
WE used Stennett and Stennett to enact a power of attorney and when my father subsequently died they dealt with the financial affairs of his estate and the sale of the house. This was done sensitively and efficiently, keeping the family informed at all times of how things were progressing.
Michael Stennett has handled our family's business over the last few years with great professionalism and charm. I am aware that our case has been extremely challenging and complex and am delighted that we have achieved a satisfactory outcome in the end. Thank you for your patience and perseverence - I would gladely recommend Stennett and Stennett's services to anyone!
They took the time to explain all of the procedures and answer my questions, no matter how trivial they were. They were professional throughout and made sure that our options were always clear and provided guidance without being forceful. They are very efficient and represent excellent value for money. Alison Allen is one of the most professional and helpful people I have ever had the pleasure of dealing with and made the whole process so easy.
My meeting with Michael Stennett following the death of my husband was sympathetic, supportive and informative on the many issues about which I was concerned. It was a very positive experience given the difficult time. Thank you.
We can thoroughly recommend Davinder Salhan at Stennet & Stennett and would like to thank her for making a complicated transaction so easy for us. She was extremely pleasant, as well as highly efficient throughout and we would have no hesitation in returning to her for any future business.
At a time when I was most vulnerable, It was nice to be able to let someone deal with a difficult situation, in the form of Probate. Also to advise me on my own will, and Power of Attorney.
Very helpful .The process was time comsumimg as explained to me by Mr Stennett.Was helpful throughout the whole process and so was Debbie. The only thing i would suggest is to call back or respins to emails in a much more timely fashion.
I would like to take this opportunity in thanking Team Stennett & Sennett for the service, I received during the sale & purchase of my property. Davinder is and asset to Stennett & Stennett, she is very professional and responsive. She explained everything in detail. I was always kept informed throughout the process of the sale and purchase. I would definitely recommend her to friends and family for future legal help and advice.
Michael Stennett made the whole process of organising the new wills for my parents extremely easy; his efficiency and helpfulness were exemplary. Michael explained all the legalize in layperson's terms and so enabled us to make sensible decisions for the future. We came away from this experience very satisfied.
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