Block Purchase (Collective Enfranchisement)
Purchasing the Freehold to a Block of Flats – The Basics
- Tenants/Owners of flats can opt to purchase the freehold of their block under the Leasehold Reform Housing and Urban Development Act 1993 (Collective Enfranchisement).
- To qualify (i) two-thirds of the leases in the block must have originally been granted for 21 years or more (which is common), (ii) 50% or more of tenants must join in the process (for blocks with just two flats, both must join the process), and (iii) no more than 25% of the block must be in non-residential use (ignoring common areas).
- The price payable will be a multiple of the ground rent payable for all flats, and for flats with a less than 100 years still to run a portion of each flat value is payable to the Landlord, an amount depending on the length of the lease still to run. For flats with less than 80 years still to run marriage value is also payable for the participating flats only.
- It is necessary to also pay the landlords reasonable legal and valuation fees, these are limited however to certain aspects of the process.
- The process takes about 4 to 6 months for most cases, whilst more complex cases can take longer.
- We can represent you through the entire process, our usual fees are £150 per flat in most cases (minimum £895), and payable following the purchase of the freehold.
- (We can alternatively extend the lease for an individual flat (see our page on Lease Extensions (Flats)).
Why Purchase the Freehold to Our Block?
Purchasing the freehold to your block has the following benefits:-
- Where flats in the block have leases below 100 years, you will hold a depreciating asset, and purchasing the freehold will permit the participating tenants to extend their leases to say 999 years following the purchase of the freehold.
- For flats nearing a lease term of 80 years still to run, you will avoid the need to pay marriage value if a notice to purchase the freehold is served before the 80 years still to run mark is reached. A flat with a lease of less than 80 years still to run is also less likely to be mortgagable and therefore will find fewer buyers.
- Often a profit will be realized from the rise in value of the participating flats following the purchase of the freehold.
- You will no longer pay a ground rent (some types of ground rent such as doubling ground rents can make a property difficult to sell).
- The participating tenants will be free to manage the block, to include repairs, improvements, maintenance and insurance.
- Where the landlord has taken enforcement action, for instance following service of a s.146, serving a notice to purchase the freehold can collapse this process.
- A flat with a “share of freehold” is likely to be a more consumer friendly and less costly form of ownership than via an external landlord.
About Orme Associates
- Orme Associates are a property services company and advise leaseholders of houses and flats on all aspects of leasehold reform. We have proven track record and have completed numerous transactions by agreement and via determination at the Leasehold Property Tribunal.
- We welcome new clients and offer free immediate leasehold advice and an estimate of the price payable.
- Our factsheet is available via this link Fact Sheet – Collective Enfranchisement
- Andrew Orme is the principal officer at Orme Associates and for advice on Leasehold Reform; Andrew’s profile is at available here via LinkedIn.