Enfranchisement from a Tenants Perspective

Enfranchisement from a Tenant’s perspective. How many flats are needed to enfranchise the freehold?

Simply put, there must be two or more flats in the building and at least two thirds of all the flats in the building must be owned by qualifying tenants (for example if there are four flats in the building, at least three flats must be qualifying tenants.) So what are qualifying tenants? Qualifying tenants have a lease of over 21 years when first granted (most leases will have 125 or 999 years when granted.) Note that despite the above, you will not be a qualifying tenant if the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions or if you (as tenant) own more than two flats in the building.

What about if there are just two flats? 

You can still enfranchise where there are only two flats but you will both need to participate. This is often preferable for tenants to increase the saleability of their individual flat and to gain management control.

What’s next? 

You will need to instruct a valuer to carry out a full inspection and valuation report which will provide you with an opinion as to the price payable for the freehold of the building and a figure to be used when drafting the enfranchisement claim notice. The claim notice will be served by the nominee purchaser.

What is a nominee purchaser? 

The Nominee Purchaser is the person named in the Initial Notice, who will acquire the freehold and become the new landlord. This is most commonly a freehold company that we would arrange to be set up on your behalf and is usually named after the property address itself. The company must be formed before serving the claim notice and the tenants and their solicitor should be ready to respond to any challenges by the landlord following service of the claim notice. The claim Notice triggers the statutory procedures for the enfranchisement process and the nominee purchaser is liable for the freeholder’s reasonable costs from the date they receive the Notice.

Once you are in receipt of the Counter Notice from the freeholder, there is a period of up to six months for both valuers to negotiate and agree a price.

After acquiring the freehold, the tenant’s who participate in enfranchisement can grant new leases, subject to some restrictions. The drafting of new leases provides an opportunity for clauses to be removed or for new ones to be inserted that benefit the tenants, especially as some terms in existing leases do not satisfy mortgage lenders’ current requirements. The lease term can then be extended to 999 years at no cost other than the legal fees.

You will need collaboration and teamwork amongst the tenants and generally a spokesperson of the group. If you are interested and think that at least 50% of the flat owners in your building wish to participate, or if you would like more information please get in touch.