It is possible to decide that it’s time for you to move on if your leasehold only covers a flat block.

It’s possible that you are fed up paying expensive ground rents or maintenance fees, as well as spending more for work that doesn’t meet your expectations.

You will have to decide if you wish to purchase the freehold together – through a legal process called colective enfranchisement.

The leaseholders must confirm this and sign an agreement of participation before the process can get underway. The agreement includes a fair market value with the freeholder.

After you’ve determined that the building is eligible, we take a look through what it takes to buy a freehold. Lucy Barber of the law firm Forsters outlines them.

The leaseholders may have decided to club together and buy the freehold - via a legal process called collective enfranchisement

One legal procedure called collective enfranchisement allows leaseholders to come together and purchase the freehold.

The steps under the Leasehold Reform, Housing and Urban Development Act 1993

Tenants can join hands and request the landlord to let them own the land under the Leasehold Reform, Housing and Urban Development Act 1993.

Mrs Barber says that it must meet the requirements of the 1993 Act.

1. Ask a professional to conduct a valuation. 

Important to ensure the correct value of the premium to be paid to the freeholder is important. The Leasehold Advisory Service website has a calculator that can give you an idea of the cost.

2. Sign a participation agreement 

Circulate the valuation and if at least 50 per cent of the qualifying tenants in the building wish to join together to purchase the freehold, the tenants will then usually sign a participation agreement where they all agree with each other to proceed with the freehold purchase statutory procedure.

3. Send the notice statutory

Serve the statutory notice of claim upon the landlord requiring them to serve the freehold. This notice also includes an offer price.  

4. LAndlord served a counter notice 

If the landlord accepts the claim it will most likely offer a counter number for the amount to be paid to freehold. If the property does not comply with the requirements of the 1993 Act or if the notice is incorrectly prepared, the landlord cannot reject the claim notice.

5. Negotiations 

The valuers of each party negotiate the amount to pay for the freehold.

6. Tribunal application

If the terms of the acquisition have not been reached, tenants must file a First Tier Tribunal application within six months. If the parties fail to reach an agreement, the Tribunal may decide the terms.

The terms of acquisition are the purchase price and also the terms of the transfer of the property

Terms of Acquisition include both the purchase price as well as the terms for the transfer of property

7. Conditions agreed

One, there’s a First Tier Tribunal Hearing where the Tribunal determines terms of the acquisition. Or the parties can agree to terms amicably. These terms include the price of purchase and the terms for the transfer.

5. The contract 

The landlord usually drafts a contract and sends it to the tenants.

6. Contract exchange

7. Finalization of transfer of the freehold

There are many deadlines that must be adhered to throughout the entire process. Therefore, it is crucial to seek out legal advice.

The Landlord-Tenant Act 1987 enables emancipation

This Act is used by landlords who wish to sell the freehold of buildings that contain two or more dwelling units. It also applies if the building meets all the requirements set forth in the 1987 Act. 

According to Mrs Barber, the landlord needs to first serve Section 5 notices on all residential tenants informing them that they have the option to purchase the freehold at the price stated in the notice.

Tenants can agree to the notice if more than 50% of qualified tenants join hands and sign the notice.

The landlord can sell the leasehold free of charge to tenants if they do not agree to it within 12 months. However, they cannot sell it at a lower price than what they originally offered the tenants.

The following are the steps of this process…

1. Section 5 Notices

A section 5 notice is served by the landlord to tenants offering them the possibility to buy freehold. The notice sets out all conditions for the acquisition.

2. Notification of Nomination

Two months are allowed for tenants to refuse the notice. They also have two additional months to issue a nomination notification – which informs the landlord about who is going to purchase the property in the name of all tenants.

3. To approve the lease, the landlord will issue a contract to tenants

4. Transfer of contracts to sell the freehold

5. Finalization of the sale 

Mrs Barber clarified that a landlord is not required to issue section 5 notices for the sale of freehold property to tenants under the 1993 Act.

However, she said that there could be a scenario in which sufficient tenants would decide to join forces to acquire the freehold. Rather than serving notices under 1993 Act, the tenants approach the landlord and ask him if the landlord is open to selling them the freehold.

“If the landlord is willing to negotiate, they can agree to the purchase cost. After that agreement is reached, section 5 notices must be served on the landlord and then the 1987 Act applies.

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