Collective Enfranchisement

Despite the Leasehold and Freehold Reform Act 2024 (the 2024 Act) receiving Royal Assent at the end of the last Parliament, we do not yet know when it will come into force (see 2024 Act Update).

As such, tenants in blocks of flats who wish to purchase their freehold must do so via one of two methods:

1. Informal Method

2. Collective Enfranchisement

Whether you are a landlord looking to dispose of a block of flats or a group of tenants looking to purchase your freehold, read on to learn more about these two methods and what legal support you will need.

A group of tenants may decide to come together to approach their landlord/freeholder and offer to buy the superior freehold (or head lease) title. There is no minimum number that may take part in this process. However, the more tenants participating should mean the costs per tenant are reduced.

A landlord has no obligation to respond to any such request and there is no formal mechanism for agreeing the premium that they demand.

If an agreement can be reached between the participating tenants and the landlord, the landlord may still have to comply with their obligations under the Landlord and Tenant Act 1987 and offer 90% of qualifying tenants in the building a Right of First Refusal. The landlord must serve section 5 notices on 90% of the qualifying tenants, offering them the right to group together to purchase the freehold at the same price as has been informally agreed. If at least 50% of the qualifying tenants accept the offer, the landlord must then sell to those tenants pursuant to the 1987 Act.

If less than 50% of the tenants wish to accept the offer, the informal sale to the original group of tenants can proceed.

The formal Collective Enfranchisement process is set out in the Leasehold Reform, Housing and Urban Development Act 1993. Whilst changes to the process have been included in the 2024 Act, until these are introduced, the process set out in the 1993 Act must still be followed.

Collective Enfranchisement is the right that certain qualifying leaseholders have to purchase the freehold of their building (subject to the building also qualifying). Strict qualifying criteria is set out in the 1993 Act restricting which leaseholders have the right to participate and a relevant number must take part in order to force the freeholder to sell to you.

The premium that must be paid to the freeholder is calculated using a formula set out in the 1993 Act and if agreement cannot be reached an application can be made to the First Tier Tribunal for the premium to be assessed.

Firstly, the building itself must be considered a Qualifying Building under the 1993 Act. This means that:

Even if the above all apply, the right of Collective Enfranchisement may not apply in certain situations such as where the landlord is a charity or where a property has been converted into flats and the landlord lives in the building. Other exemptions include national Trust Properties or properties owned by the Crown.

To be a Qualifying Tenant a leaseholder must own their flat on a “Long Lease” (e.g. one initially granted for at least 21 years – most leasehold flats will be on Long Leases).

At least 50% of the Qualifying tenants in the building must participate in the process.

1. At least two flats in the building
2. No more than 25% of the total building area may be for non-residential use
3. At least 2/3 of the flats must be owned by Qualifying Tenants
4. At least 50% of the Qualifying Tenants in the building must participate
   must participate in the process.

Please note that the calculation for the premium is a complicated process that specialist valuers/surveyors can advise on. We strongly advise all clients to seek separate
valuation advice regarding the premium before making an offer to your landlord.

If you qualify for the Collective Enfranchisement process, please get in touch and we can assist you with the next steps.

Our specialist collective enfranchisement lawyers are able to assist with the process from start to finish. Our lawyers are experienced in both the informal method and requirements of the 1987 Act and the formal Collective Enfranchisement Method.

If you have any questions on any of the above do not hesitate to contact our property team on +44 (0) 207 228 0017 or via the form below.