The Collective Enfranchisement Guide is a series of articles which will be useful for leaseholders looking to purchase the freehold of their building, and, for freeholders in receipt of an initial notice.
Prior to serving the Initial Notice and commencing a collective enfranchisement claim, it is necessary to establish that the building qualifies for collective enfranchisement, and that the leaseholders are eligible to make the claim. Part 2 of the guide will set out which buildings qualify, and what a qualifying tenant is. The rules around eligibility are complex, however in summary they are:
1. Does the building qualify?
The building qualification criteria require that:
(a) The building must contain at least two flats
(b) At least two-thirds of the flats must be owned by qualifying tenants (covered at point 2 below)
(c) Not more than 25% of the building (excluding common parts) must be used for non-residential purposes (such as shops or offices, but garages and parking spaces will be classed as residential).
However, some buildings are excluded from the right to collective enfranchisement altogether, such as:
Buildings within a cathedral precinct
National Trust properties
If the freehold includes a railway track, bridge, tunnel or retaining wall to a railway track
Buildings with a resident landlord
If it is found that the building does qualify, then it is necessary to establish if there are enough qualifying tenants, to proceed with the proposed collective enfranchisement claim.
2. Are there enough ‘qualifying tenants’ participating?
A qualifying tenant is one whose lease meets one of the following conditions:
(a) The lease was for a fixed term of more than 21 years when it was granted
(b) The lease contains a covenant or obligations for perpetual renewal
(c) The lease is terminable on death or marriage or an unknown date
(d) The lease is a continuation of a long lease under the Local Government Housing Act 1989 following the expiry of the original term
(e) The lease was granted as a result the ‘right to buy’ or ‘right to acquire on rent to mortgage terms’
(f) The lease is a shared ownership lease where the leaseholder’s share is 100%
However, a leaseholder will not be a qualifying tenant, if the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions, the leaseholder owns more than two flats in the building, or, the leaseholder has a business / commercial lease.
The minimum number of participating tenants is half the total number of flats in the building (unless there are only two flats in the building, in which case the leaseholders of both flats must qualify and participate).
Why use a solicitor?
The collective enfranchisement process is complex, and there are many pitfalls to avoid. We suggest solicitors are instructed before commencing the process or at the earliest opportunity – they can determine whether the building qualifies, and if there are enough qualifying tenants for the claim to succeed.
Part 3 will consider the pros and cons of collective enfranchisement for leaseholders. Later parts will explore how leaseholders should organise for a collective enfranchisement claim.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.