You are the freeholder or intermediate leaseholder of a block of flats and want to know if your tenants can enfranchise the block? The following is the criteria to establish whether your tenants can enfranchise the block under the Leasehold Reform, Housing and Urban Development Act 1993:
Can my tenants enfranchise the block? The qualifying criteria.
In order for a building to be enfranchised on a statutory basis, it is necessary for it to be an independent building, or part of a building which is capable of independent development; contain two or more flats held by qualifying tenants; not have a resident freeholder (unless the building is a purpose built block of flats or comprises more than four flats); have at least 75% of the internal floor area used for residential purposes; and have at least two thirds of the flats held by qualifying tenants.
To be a qualifying tenant, the original lease term must have been for more than 21 years, not be a business tenancy, and the lessee must not own more than two flats in the building.
It is possible for the purchaser of a flat to elect to participate in the acquisition, if the vendor was a person that signed the initial Notice.
Can my tenants enfranchise the block? Notice requesting information.
If a lessee satisfies the qualifying criteria, they can, without obligation, serve Notice on the freeholder or managing agent requiring details of the various leasehold interests in the block. The response should provide sufficient information to ascertain whether the building contains enough qualifying tenants to enable it to qualify.
Can my tenants enfranchise the block? Are there sufficient participants?
In addition to the requirement for the building to qualify, the participating tenants must be not less than the lessees of half of all of the flats in the building, but all of them, if the building contains two flats.
Can my tenants enfranchise the block? Do they have sufficient funds to finance the purchase?
Some of the participating tenants might decide to borrow funds from a bank or building society. It is possible for the participants to acquire the interests of the non-participants, or invite a “White Knight” purchaser to do so, in both cases, in return for receipt of ground rent, premiums from future lease extensions and possibly other income from the non-participants, or otherwise.
Can beneficiaries of a deceased participating tenant be a participant?
The personal representative of a deceased participating tenant can elect to withdraw from being a participant, but will otherwise be regarded as a participant.
If my tenants can enfranchise the block, what are they entitled to acquire?
If the building qualifies, and there are sufficient participants to qualify for enfranchisement, the participants, through their nominee, are entitled to become the freeholder of the building, subject to the various flat leases, and will become responsible for the management of the building and service charge. So effectively, the participating tenants will replace the existing freeholder, and they will be able to grant themselves leases of whatever term they desire at peppercorn rents. The purchaser of the non-participants, which might be the nominee of the participants, or a “White Knight” purchaser, will be entitled to receive from the non-participants, ground rent, premium receipts from future lease extensions and possibly other income from them or otherwise.
For more information on how the enfranchisement price is calculated see What price will I receive for the block?
For more information on the process see Statutory Process – Blocks of Flats
Our services: We are able to advise you on the price you are likely to receive from the enfranchisement of a block where you are either the freeholder or intermediate leaseholder. If you have received a section 13 Notice under the 1993 Act, or a copy of one, we are able to advise on the figures for the Competent Landlord to insert in a Counter-Notice, to be served no later than that date specified in the Notice. We are Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement. We are also able to provide further information to answer Can my tenants enfranchise the block?
