As the demand for housing in London and the suburbs increases, leasehold flats and conversions into maisonettes, are becoming increasingly popular. When purchasing flats on a long lease, an obvious consideration is how long the lease has left to run.
The Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) gives tenants a collective right upon qualification to compel the landlord to sell the freehold of the building, and to individual tenants, to request a lease extension from the landlord following two years of ownership.
If exercising the collective right to buy the freehold, called collective enfranchisement, the participating tenants would usually do so with a view to taking over the management of the building, granting themselves long leases, and varying other provisions of each individual lease such as those relating to service charges, and ground rent.
The formal procedure for collective enfranchisement is done by service of an Initial Notice on the landlord; it then follows a prescribed route. The notice must be served by a Nominee Purchaser on behalf of the participating tenants, usually either a company, or in the case of there being two tenants, the individuals themselves. Despite the fact that this is the beginning of the claim, tenants considering a collective enfranchisement claim should have undertaken preparatory work in order to ensure the requirements of the legislation are met, and that any agreements as to the participation of the tenants in the procedure are completed.
The first stage is one of the most important; namely to check the eligibility of the building. The general requirements are that there are at least two flats in the building and that at least two thirds are let to qualifying tenants. Qualifying tenants are defined as those with long leases. There are a number of exclusions including business or commercial leases, leases where the tenant owns more than two flats in the building, or buildings where more than 25% of the internal floor area is not for residential use. In addition the number of tenants wishing to participate in the purchase must be not less than 50% of total number of flats, although in cases where there are only two flats both must participate.
If you are considering collective enfranchisement of flats, at Benchmark Solicitors LLP we can advise you as to the complex procedure and potential court claims which can result.