If you’re the landlord of a residential property or a building that contains two or more flats, where your tenants have long leases, you need to be aware of Enfranchisement and Collective Enfranchisement.
What is enfranchisement?
Enfranchisement is the right outlined in the Leasehold Reform Act for leaseholders to buy the freehold of the property they are leasing. Alternatively, leaseholders have the right to extend their lease by 90 years from the date it was originally due to expire.
Does my property qualify for enfranchisement?
In order to qualify for enfranchisement, the property must be considered to be a house that is divided vertically to any adjoining properties. If the property has been divided into flats, it is still eligible for enfranchisement if the leaseholder has the lease for the whole house. Some commercial properties may also qualify for enfranchisement, such as shops that have a flat above where the leaseholder has a lease for the entire property.
Does my tenant qualify for enfranchisement?
For a tenant to qualify for the right to enfranchise, they must have a long lease for a term of more than 21 years, or with a right to renewal. The tenant must be the leaseholder when they apply for enfranchisement and have held the lease for at least two years in the last 10 years. In instances where a qualifying leaseholder dies, their personal representatives are also eligible to apply for enfranchisement for up to two years from when probate has been granted, or from obtaining a letter of administration.
How does my tenant apply for enfranchisement?
The tenant starts the process of applying for enfranchisement by serving notice to the landlord. In instances where there is an intermediate landlord, the tenant must also serve notice to them. When serving notice, the tenant does not need to include a proposed price. The tenant can serve the notice by post (at the landlord’s last known address in England and Wales) or in person.
What to do if I’m served notice for enfranchisement?
If you are served notice for enfranchisement, and you want to have the ability to challenge the notice or negotiate the valuation, you must serve a notice in reply within 2 months of the date that the tenant serves notice. This notice must include whether you admit the tenant’s claim or whether you dispute it, together with your reasoning. If you do admit the claim, you are entitled to ask for a deposit that equals to three times the annual rent of the property. Once a price for the freehold has been agreed, the completion of the sale must take place at least 4 weeks after this agreement.
What is collective enfranchisement?
Collective Enfranchisement is the right outlined in the Leasehold Reform Housing & Urban Development Act 1993, for leaseholders of a building, or part of a building that contains flats to collectively buy the freehold of that property.
Does my property qualify for collective enfranchisement?
In order to qualify for collective enfranchisement, the property must be a self-contained building, or part of a building, that contains at least two flats. In instances where the property is part of a building, there must be a vertical division making it independent to that part (or accessible without interruption to that part). At least two-thirds of the flats must be owned by qualifying tenants, and half the qualifying tenants in the building must participate. The building must have no more than 25% of the space in non-residential use, such as offices or shops.
Do my tenants qualify for collective enfranchisement?
In order to qualify for collective enfranchisement, tenants must have long leases that exceed 21 years from the date it was first granted. Tenants are not eligible if they own more than two flats in the building (either jointly or in their own name).
How do my tenants apply for collective enfranchisement?
In order to apply for collective enfranchisement, qualifying tenants must organise for enfranchisement. They need to agree on a Nominee Purchaser who will action the stages of the collective enfranchisement, and on completion will become responsible for all the landlord covenants within the leases. The Nominee Purchaser can be one of the tenants that applies for collective enfranchisement or a third party. The Nominee Purchaser will be named in the Initial Notice.
What to do if I’m served notice for collective enfranchisement?
If you are served Initial Notice, you are entitled to request evidence of the participating leaseholder’s titles to their flats. This request must come within 21 days of receiving the Initial Notice, and the Nominee Purchaser must respond to this request within 21 days after the request has been made. No matter whether you choose to make a request for evidence or not, you must serve a Counter-Notice by the date specified in the Initial Notice. This date will be at least two months from the date the Initial Notice was served.
Further reading: ‘A Landlord’s Guide to Right to Manage‘ Find out what happens if you’re served a RTM Notice by your tenants.
If you’re thinking about selling your freehold, send us an email via our online contact form or speak with one of our experts on 01245 227 920.