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Collective Enfranchisement for Leaseholders

Background
As a matter of law, subject to certain qualifying criteria, long leaseholders of flats are able to acquire the freehold interest to their block or conversion.

There are two main reasons that drive long leaseholders to become co-owners of the freehold.
 
1.    As a lease draws close to a period of 80 years remaining, it becomes increasingly more difficult to sell the property. Leaseholders attempting to sell in this position are often pressurised into obtaining a lease extension in order to sell the property. By contrast a flat with a share of the freehold, will be easy to sell and will always attain a higher price.
 
2.  Many leaseholders perceive their freeholders to be unscrupulous. They believe that service charge demands in respect of insurance, management fees and repairs are excessive. Whilst the law has changed to protect leaseholders from such practices, a number of leaseholders feel with some justification, that the only option to provide long-term protection and security, is to purchase the freehold collectively.

 

Qualification
The rules relating to qualification have been adjusted to help more leaseholders become joint owners of their freehold.

In brief at least 50% of the long leaseholders must be in agreement to acquire the freehold.  In addition at least two-thirds of the flats must be sold on long leases. These are the two main considerations, although there are other factors that may need to be taken into account.  Please contact us for verification of your rights.

 

Valuation Matters
The valuation issues are fairly complex, but briefly the landlord (freeholder) is entitled to compensation for:

  • Loss of the ground rent income, which is payable under the terms of the lease.
  • Loss of the right to the reversionary interest at the expiration of the lease. That is to say the right to receive the flat back at the end of the original lease.
  • Where the lease has less than 80 years to run, under current legislation, the landlord is entitled to a 50% share of any additional value (marriage value), which results from the merging of the new and old leases. This is more precisely the difference between the freehold value of the flat and the combined value of the landlords and leaseholders existing interests prior to the grant of the lease extension. 

There is an additional head of claim entitled “other losses”.   Generally most claims will not provide for any compensation to be paid under this heading. However there may be instances where for example the landlord has retained part of property, for example the roof space, or an outbuilding, or maybe he has retained a flat within the development.  Any such issues and others will need to be considered.

 

Why Act Now?
Because as time progresses the freeholders interest will escalate in value, whilst the leaseholders interests will fall in value. Moreover any increase in value due to house price inflation, will as the lease shortens have to be shared disproportionably in the freeholders favour.

Moreover if the leaseholders are being, or are likely to be exposed to excessive service charges, an early acquisition of the freehold will speedily avoid such costs.

 

The Solution
At Mike Stapleton & Co, we have been actively involved in negotiating terms for freehold transfers since the Leasehold Reform, Housing and Urban Development Act 1993, first gave leaseholders the statutory right to collectively enfranchise their freehold.

Over the years we have helped numerous leaseholders acquire their landlords freehold interest, many involving highly contentious disputes with large powerful landlords such as the Freshwater group, Sinclair Gardens, Regis and the Church Commissioners, just to name a few. 
In the unlikely event that an amicable settlement cannot be reached, we will happily represent you at a Leasehold Valuation Tribunal, who in the absence of agreement will determine the price to be paid for the freehold. We have a wealth of experience in representing clients at the Leasehold Valuation Tribunal.

Our geographical area of coverage extends throughout central and outer London and the entire Home Counties.

Please take a look at our client testimonials to see what our customers think of us.

 
ALEP

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