You are freeholder, intermediate leaseholder, leaseholder, or purchaser of a flat, wanting to know the Statutory Process for Enfranchisement of Blocks of Flats under the Leasehold Reform, Housing and Urban Development Act 1993.
Statutory Process - Blocks of flats. Qualifying criteria.
For a building to be enfranchised, it must be an independent building, or part of a building capable of independent development; contain two or more flats held by qualifying tenants; not have a resident freeholder (unless purpose built, or comprising more than four flats); have at least 75% of the internal floor area in residential use, and at least two thirds of flats held by qualifying tenants.
To be a qualifying tenant, the original lease term must have exceeded 21 years, not be a business tenancy, and the lessee must not own more than two flats in the building.
The purchaser of a flat can elect to participate, if the vendor signed the initial Notice.
Statutory Process - Blocks of flats. Requesting information.
A lessee that satisfies the qualifying criteria, can without obligation, serve Notice on freeholder or managing agent requiring details of leasehold interests in the block. The response must give sufficient information to establish if are enough qualifying tenants to enable the building to qualify.
Statutory Process - Blocks of flats. Sufficient participants?
The participants must not be less than the lessees of half of all flats in the building, but all of them, if the building has two flats.
Statutory Process - Blocks of flats. Funds to finance?
The participants might borrow funds. The interests of the non-participants might be acquired by participants, or a "White Knight". These are ground rent, future lease extension premiums, and possibly other income.
Statutory Process - Blocks of flats. Beneficiaries of deceased participant.
The personal representative of a deceased participant will continue as a participant unless they elect not to.
Statutory Process - Blocks of flats. Entitlement?
If the building qualifies, and there are sufficient participants to qualify, the nominee of the participants will become freeholder of the building, subject to the flat leases, with responsibility for management and service charge. The participants will be able to grant themselves leases of any duration at peppercorn rents. The purchaser of the non-participants, either participants, or “White Knight”, will receive ground rent, future lease extension premiums and possibly other income.
Statutory Process - Blocks of flats. Valuation.
Before making a Claim, the leaseholders should obtain valuation advice. See What price will I receive for the block? if you are freeholder or intermediate leaseholder; or What price will we have to pay for the block? if you are tenant or purchaser.
Statutory Process - Blocks of flats. Purchasing vehicle, taxation, and participation agreement.
The participants should decide upon acquisition vehicle, and take account of taxation implications, shareholding allocations, and formulation and regulation of their relationships - possibly with Participation Agreement.
Statutory Process - Blocks of flats. Making a Claim.
If the participants have, or obtain sufficient information, they can serve Notice, to include:
- Extent of property Claimed, supported by plan;
- Particulars of qualifying tenants, not just participants;
- Proposed price;
- Name and address of Nominee Purchaser (nominated by participants to purchase freehold); and
- Date by which freeholder must serve Counter-Notice, being not less than two months of date of Notice.
Statutory Process - Blocks of flats. Deposit and deduction of title.
The freeholder will likely respond with Notice, requesting deposit of 10% of the price offered, and the participants to deduce title.
Statutory Process - Blocks of flats. Freeholder's valuer's inspection.
The freeholder's valuer will likely inspect the flats and prepare a valuation.
Statutory Process - Blocks of flats. Counter-Notice.
By the date stated in the Notice, the freeholder must serve Counter-Notice admitting or denying the Claim. If denied, the Participants may dispute this in Court, but mindful of circumstances where freeholders can resist Claims on grounds of redevelopment.
If the Claim is admitted, the Counter Notice must state, amongst other things:
- Which proposals in Notice are accepted;
- Which proposals in Notice are not accepted;
- Freeholder's counter-proposals, often including higher price; and
- Whether freeholder wants leasebacks of any units not held by a qualifying tenant (possibly a short-term tenancy or commercial unit).
Statutory Process - Blocks of flats. Application to Tribunal.
Two months post Counter-Notice date, either party can apply for the First Tier Tribunal (Property Chamber) to determine any terms of acquisition including price remaining in dispute. Application must be within six months of Counter-Notice date to avoid Deemed Withdrawal, that would necessitate waiting one year before being able to serve another Notice.
Statutory Process - Blocks of flats. Notice of Separate Representation.
Any Intermediate Landlord can, at any time after service of Counter-Notice, serve Notice to be Separately Represented in any legal proceedings.
Statutory Process - Blocks of flats. Conveyancing.
Once terms of acquisition including price are agreed, or determined by a First Tier Tribunal (Property Chamber), or Upper Tribunal (Lands Chamber) the conveyance must follow a prescribed process and timetable.
Statutory Process - Blocks of flats. Withdrawal.
Notice can be withdrawn at any time, and is Deemed Withdrawn when prescribed timetable contravened. In either circumstance, the participants still pay recoverable legal and valuation costs of freeholder and any intermediate leaseholders. If paid, the deposit is refunded plus interest, less recoverable costs.
Statutory Process - Blocks of flats. Appeal.
Right of appeal is to the Upper Tribunal (Lands Chamber) on prescribed grounds and timetable from a First Tier Tribunal (Property Chamber)'s determination.
Statutory Process - No right to participate.
A lessee with qualifying lease can request being a participant, but have no right to be, or remedy of denial. A group could exclude a qualifying lessee that wants to participate.
Our services: We are able to advise on the enfranchisement price for a block where you are either leaseholder, intermediate leaseholder, or freeholder and on figures for insertion in a section 13 Notice, or section 45 Counter-Notice. We are Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement. We can provide further information on the Statutory Process - Blocks of flats.
