What is Collective Enfranchisement?

Collective enfranchisement effectively allows leaseholders to “force” a freeholder to sell them the freehold on a property.

In order to use the collective enfranchisement procedure, the following must apply:

  • The building must consist of at least two flats
  • Those flats must make up at least 75% of the building
  • At least 75% of the flat owners must be “qualifying tenants” (i.e. leaseholders with at least a 21-year lease)
  • No more than 25% of the building can be non-residential.

It is important to note that at least 50% of the leaseholders must participate in the purchase of the freehold. For example, if there are four flats in the block, at least three leaseholders must join together to purchase the freehold.

What does the process involve?

As to the procedure, a freehold property valuation must first be obtained by the participating tenants to determine the freehold’s worth. This is then used as the basis for preparing and serving a formal notice on the freeholder proposing a purchase price.

The freeholder then has two months to respond with a counter-notice proposing a purchase price, after which follows a period of negotiation between the freeholder’s surveyor and the participating leaseholders’ surveyor in order to reach an agreement as to the purchase price for the freehold.

It is often recommended that the participating leaseholders form a new limited company to purchase the freehold property for ease. Each participating leaseholder should own a share in the newly formed company. When an individual flat is sold, a share in the freehold company will be transferred to the buyer at the same time as the transfer of the leasehold property.

Why bother?

Collective enfranchisement offers several advantages to the leaseholders:

  • By owning the freehold collectively, leaseholders gain control over decisions related to maintenance, repairs and improvements
  • Leaseholders can extend their individual leases to 999 years, eliminating concerns about lease expiration and potential ground rent increases
  • Properties with a share of the freehold tend to be more attractive to buyers, potentially increasing their market value
  • It provides long-term security, stability and a sense of ownership for residents

Further advice

Whether you are a leaseholder looking to purchase the freehold or the freeholder of a block of flats who has received a collective enfranchisement notice from the leaseholders, Fisher Jones Greenwood LLP can assist.

Simply contact Sarah Shea or Leon Pascal on 01245 890110 or by email at [email protected] or [email protected].

Disclaimer: This guide provides general information and should not be considered legal advice. Always consult a qualified professional for personalised guidance based on your specific circumstances. The contents are based on the law as at the date of publication.