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Flats – Collective Enfranchisement
What is this?
Under the Leasehold Reform, Housing and Urban Development Act 1993, the Leaseholders in a block of flats can compel the Freeholder to sell them the Freehold collectively. Most Leaseholders do this so they can have tighter control over the management and maintenance of their block, and are able to extend their own individual leases as they wish.
What is the Right of First Refusal?
This is the situation where the Freeholder intends to sell the freehold to a third party. He has an obligation under the Landlord and Tenant Act 1987 to offer you the freehold first. If you receive formal notification that this is his intention, we can advise the Leaseholders on the best way to proceed.
Our Landlord has told us that he is selling the freehold at auction. What should we do?
And are you keen to have the freehold yourselves, but are worried that you would pay too much or else end up with a new Landlord who may put up the service charge and insurance?
Firstly, the price of the freehold at auction will often be cheaper than buying it under the collective enfranchisement process.
Secondly, you are entitled to have it at the same price as the highest bidder, as long as you have followed the process under the Landlord & Tenant Act 1987.
Are we eligible to purchase the freehold?
There are several legal requirements which must be met before you qualify to purchase the freehold of a block of flats. These will be explained to you when you get in touch with us.
How much will it cost us?
This is rather complicated! The Landlord is entitled by law to be compensated for the following:
- Loss of the ground rent income he would have received to the end of the existing leases (the term value).
- The value of the freehold (including the flats) when the leases expire (the reversionary value).
- His share of the marriage value (see Glossary).
- The value of other interests, e.g. garages, Rent Act tenancies and compensation for other losses.
Calculating the level of compensation is an imprecise science, and very complicated. This is the reason you need to employ a specialist valuer in the Collective Enfranchisement process. Instructing Nick Plotnek Associates will ensure you pay a fair price and will be guided through the process to a successful conclusion.
Other than the price we have to pay to the Landlord, are there any costs?
Once you commit to the Collective Enfranchisement process you become responsible for the freeholder’s “reasonable” costs.
These are limited to professional fees such as legal costs and valuer’s fees.
You will not have to pay his costs of going to a First-tier Property Tribunal, should the matter not be agreed beforehand.
Do we have to go through the Act to buy the Freehold?
No, you can always negotiate informally with your Landlord to buy your freehold. However if you cannot agree on terms you cannot go to the First-tier Property Tribunal if you haven’t applied to buy your freehold under the Act.
Our Landlord wants an ‘administration fee’ for pricing our freehold. Should we pay this?
You are better off getting your own valuation first as a price given to you informally by a Landlord (that is, without going through the formal procedure under the Act) is quite likely to be unfavourable. If you pay the Landlord’s fee first and later challenge the price, that fee will be lost and you will still be obliged to pay the Landlord’s fees under the Act.
Our Landlord seems to be stalling when discussing our freehold. Why is this?
It’s in your Landlord’s interest to stall matters as the price of your freehold continues to rise the shorter your leases get. This is especially common when the unexpired term of your leases approaches 80 years, as once it’s dropped below this the price will rise significantly.
We can’t get hold of our Landlord. Can we still buy the freehold?
Even if your Landlord has disappeared without trace you can still buy the freehold as the County Court has the power to dispense with the need to formally serve a Notice on your Landlord.
How long will the process take?
This really depends on how difficult your Landlord is to deal with, but from experience we would allow somewhere between eight and fourteen months.
How do I start the process?
By visiting our web site you have made the first, most important step. Nick Plotnek Associates will take the next step in the Collective Enfranchisement process and ensure that it continues to run smoothly for you.
If you decide to go ahead with the Collective Enfranchisement process we will arrange for the statutory procedures to be started, and then continue the negotiation process. If necessary, we will represent you at the Tribunal should the parties fail to reach an agreement.
Please contact us for further information or Call us now on 0121 427 2800