The Leasehold Reform Housing and Urban Development Act 1993 (the Act) gave the right to long leaseholders to get together and force their landlord to sell them the freehold of the property. The advantages of this procedure, known as collective enfranchisement, are that the leaseholders can then manage the building in the way that they want and can grant themselves new and longer leases to make their flats more saleable without paying a premium to the landlord.
The Act sets out the criteria which both the property and the leaseholders must meet in order to exercise this right to buy.
The right to buy is usually exercised by a Flat Management Company which is set up specifically to purchase the freehold. The first step is to find out what the freehold is worth and advice from a surveyor specialising in this area of valuation work will be necessary. The next step is usually the setting up of the Flat Management Company, which is straight forward and relatively inexpensive.
Notice is then served on the landlord, claiming the right to buy and stating the price the leaseholders’ company is prepared to pay for the freehold.
As with the right to manage there is a lot of preparatory work to be done by leaseholders before they will be ready to instruct their solicitors to serve notice on the landlord. The leaseholders will have to pay the landlord’s legal and valuation costs, whether or not the procedure completes, and so the notice should not be served without proper planning, information and advice.
The landlord will serve a counter notice stating whether or not they accept the leaseholders’ right to buy and whether or not the payment offered is accepted. If the figure is disputed, it is usual for the landlord’s and leaseholders’ valuers to negotiate to try and reach a figure which is acceptable to both, once the notice and counter notice have been served, and if agreement is not possible then an application will need to be made to the First Tier Property Tribunal for a decision. The Tribunal will also determine any other dispute which may arise from the leaseholders’ claim.
If the landlord is absent, then notice cannot be served and it will be necessary to make an application to the County Court for a vesting order. This is normally granted without a formal hearing as long as the Court is satisfied that all necessary steps have been taken to find the landlord. An application will then need to be made to the First Tier Property Tribunal for an order about the price to be paid for the freehold. The money will have to be paid into Court and the freehold will be transferred to the Flat Management Company by an officer of the Court signing the transfer document.