Subject to qualifying criteria, the owners of flats have a right under the Leasehold Reform Housing & Urban Development Act 1993 to join together and attempt to buy the freehold of a building. This process is known as Collective Enfranchisement.
Provided that at least 50% of the flats in the building (subject to the leaseholders being qualifying tenants) participate in the action, it is said the Landlord cannot refuse. A qualifying tenant is a leaseholder who has a lease that was in excess of 21 years when first granted. It is likely this will cover most residential flat leases because they are often 99 years or 125 years when they are first granted. The building must also contain at least two flats and at least two-thirds of the flats must be owned by a qualifying tenant.
That said, it is important to note that even if the above criteria is satisfied, if any of the tenants own more than two flats in the building (either in their sole name or jointly with others) they will not be deemed to be a qualifying tenant. If this particular scenario applies, the flats will be discounted from the two-thirds figure as mentioned above.
Furthermore the building must also pass the 25% non-residential rule. This means that if more than 25% of the internal floor area of the building (excluding any common parts) is not used or not intended to be used for residential purposes, the building itself would not qualify for the process.
There is also no right of collective enfranchisement if any 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 of the building into flats
- The landlord or an adult member of their family has lived in one of the flats for the past 12 months
Taking into account all of the information noted above, if the right of collective enfranchisement still applies, the minimum number of participating tenants must equal half the total number of flats in the building. The next stage of the process involves choosing a nominee purchaser, instructing a solicitor (a surveyor may also be required) and gathering all the information to serve the relevant notice on the landlord.
For further advice relating to collective enfranchisement, get in touch with Farleys Commercial Property Department on 0845 287 0939 or alternatively contact us through the website.