Except in very rare situations, any leaseholder can, with fellow leaseholders, collectively “enfranchise” the property and purchase the freehold of the building from the freeholder. Leaseholders will have to hold a long lease ie originally granted for at least 21 years and should not own more than two flats. At least 50% of the leaseholders must participate. The building must contain at least two flats and where there are only two, both must participate. At least two thirds of the flats must be owned by qualifying tenants and no more than 25% of the building can be used for commercial purposes. Unlike with lease extension, leaseholders do not have to have owned their leases for a minimum of two years before they can participate in enfranchising the property.
Under the terms of Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993 as amended by the Housing Act 1996 and the Commonhold and Leasehold Reform Act 2002, eligible leaseholders have a statutory right to enfranchise their leases. This is called the “Statutory Route”.
The Statutory Route starts by a leaseholder commissioning a Chartered Surveyor to provide a valuation of the Premium. This involves undertaking a fully measured and photographed survey of the property, extensive research as to its value and the preparation of complex calculations as to the value of the premium.
The leaseholders’ solicitor then prepares a S13 Notice which features our figure which is served on the freeholder. This forms an “offer”. The freeholder must respond to the Notice within two months through their solicitor with a S15 Counter Notice. If no response is received within this time, the figure featured in the S13 Notice is deemed to have been accepted.
If the Freeholder’s solicitor serves a S15 Counter Notice, the parties have six months from the date of the counter notice to reach agreement, refer the matter to the First Tier Property Tribunal for adjudication or they will have to begin the process all over again.
The leaseholders are liable for the cost of commissioning their own valuation of the premium to enfranchise the property, the freeholder’s reasonable cost to commission their own valuation and the legal costs of both parties relating to the serving of the S13 and responding with a S15 Counter Notice. The leaseholders are liable for the reasonable legal costs of both parties for drafting, agreeing and registering the title deed and leases.
It is customary for valuers acting for leaseholders and freeholders to value the premium payable in favour of their appointed party. This leads to a disparity or “spread” between the figures featured in the leaseholders’ S13 Notice and the freeholder’s S15 Counter Notice. While the respective parties are free to negotiate the premium themselves, due to the complexity of the calculations involved, their interests are best represented by instructing the respective surveyors to negotiate the premium on their behalf. While the leaseholders are obliged to reimburse the freeholder’s reasonable cost to value the premium, each party is obliged to pay their own costs relating to the negotiation of the premium.
All of our practitioners in this field are Chartered Surveyors and RICS Registered Valuers. We are the preferred valuers of numerous firms of solicitors acting for their clients as well as a number of institutional freeholders and property investors. This is a highly specialised area and we would recommend that leaseholders are represented by a firm of solicitors specialising in this field. Please let us know if you would like us to recommend such a firm.
Whether you are a leaseholder looking to enfranchise your property or a freeholder who has been served a S13 Notice, please contact us without delay, in strict confidence and without obligation in anticipation of expediting a fair and reasonable settlement.
