You are freeholder, intermediate leaseholder, leaseholder, or purchaser of a house, wanting to know the Statutory Process for Enfranchisement of Houses under the Leasehold Reform Act 1967.
Statutory Process – Houses. Qualifying criteria.
In order for a house to be enfranchised on a statutory basis, the building, lease and tenant must qualify.
For the building to qualify it must be a “house”. This can include a shop with flat above, or a building converted into flats, and possibly offices. It will not be a “house” if a material part lies above or below a part of the structure not comprised in the house.
The lease must comprise the whole of the house and the original term must have been for in excess of 21 years, or in excess of 35 years for a business tenancy.
The tenant must have owned the lease of the house for a minimum of two years. The tenant also has to have occupied the house as their only or main residence for a period of two years out of the preceding ten, if the house has a mixed use with a business tenancy (such as a shop with flat above) or if it contains a flat with a qualifying lease under the provisions of the Leasehold Reform, Housing and Urban Development Act 1993.
It is possible, when a house is sold, for the Vendor to begin the enfranchisement process by serving Notice of Claim, and Assigning the Benefit of the Notice to the Purchaser.
The 1967 Act also allows the qualifying tenant of a house to be granted a 50 year extension of the lease at a Modern Ground Rent throughout the term, without paying a premium. This right is rarely exercised.
Statutory Process – Houses. Personal representative of a deceased person.
The personal representative of a deceased qualifying tenant can make a Claim, provided they do so within two years of the date of grant of probate.
Statutory Process – Houses. Entitlement?
If the building, tenant and lease qualify, the tenant is entitled to acquire the freehold of the house and any intermediate leases, and will become responsible all repairing obligations.
Statutory Process – Houses. Valuation.
Before making a Claim, the leaseholder should obtain valuation advice. There are three different bases of valuation in the 1967 Act, being under section 9(1), 9(1A), or 9(1C).
See What price will I receive for the house? if you are freeholder or intermediate leaseholder; or What price will I have to pay for the house? if you are tenant or purchaser.
In addition to paying the price, the tenant is required to pay the reasonable legal and valuation costs of the freeholder and any intermediate leaseholders.
Statutory Process – Houses. Making a Claim.
If the building, lease and tenant qualify, the tenant can serve Notice, to include:
- A description of the house, not necessarily with a plan;
- Particulars to establish the lease and the tenant qualify; and
- Whether the tenant thinks the basis of valuation is under section 9(1), 9(1A), or 9(1C).
Statutory Process – Houses. Deposit and deduction of title.
The landlord is likely to respond with a Notice, requiring the payment of a deposit of three times the rent payable under the lease, requesting the tenant to deduce title, and if the residence test applies, a statutory declaration of fulfilment.
Statutory Process – Houses. Freeholder’s valuer’s inspection.
The freeholder’s valuer will likely inspect the house and prepare a valuation.
Statutory Process – Houses. Counter-Notice.
The freeholder must serve Counter-Notice, within two months of the date of the Notice, admitting or denying the Claim. If denied, the tenant may dispute this in Court. The freeholder cannot resist a Claim on grounds of redevelopment.
Statutory Process – Houses. Application to Tribunal.
Two months post Notice date, either party can apply for the First Tier Tribunal (Property Chamber) to determine any terms of acquisition including price remaining in dispute. There is no time limit on making the application.
Statutory Process – Houses. 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 proceeds to completion, but there is no prescribed timetable.
Statutory Process – Houses. Withdrawal.
Notice can be withdrawn at any time, up to one month following the determination of the purchase price.
Statutory Process – Houses. 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.
Our services: We are able to advise on the enfranchisement price for a house where you are either freeholder, intermediate leaseholder, leaseholder, or purchaser, and negotiate the price for you. If you, or if you are a purchaser, your vendor, intend to serve Notice of Claim under the 1967 Act, we are able to advise on whether the valuation should be under section 9(1), 9(1A), or 9(1C) of the 1967 Act, the likely enfranchisement price, and to negotiate the price for you. 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 in relation to the Statutory Process – Houses.
