Latest News Article "A wake-up call to property owners who allow others to occupy land they own as if it were the squatters' own land" View Articles >   Please contact us on 0208 989 3000 or email tmurphy@huggins-law.co.uk Flats (1) COLLECTIVE ENFRANCHISEMENT – The right to buy YOUR Freehold Under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002), as the leasehold owners of the flats in your block, you can join together and buy the freehold from your Landlord. The Benefits As freeholders, you will be able to: extend your own leases as often as required at no cost to yourselves. vary the terms of your leases to suit your specific needs and requirements now and in the future vary the amount of ground rent payable manage the property yourselves or through chosen managing agents; controlling the extent of the services and the specific charges payable control the timing, cost and extent of any repairs to your block manage insurance costs grant consent to alterations to yourselves or grant new rights over the block/individual flats e.g. a loft conversion or basement extension. All the above benefits put you in control of your own property and makes your individual flat more attractive to potential buyers and mortgage lenders. Qualification Generally, you will collectively qualify under the Act if:- at least of the flats in the block are let to qualifying leaseholders; and not more than 25% of the internal floor area of the block (excluding the common part) is for non-residential purposes; and at least 50% of the qualifying leaseholders in the block participate in the purchase (unless there are only two flats in the block whereupon both qualifying leaseholders must participate.)** A qualifying leaseholder is an owner of a flat whose lease has been granted for longer than 21 years and who is not a business tenant. But if one leaseholder owns more than 3 flats in the block, those flats will not be treated as though they are owned by qualifying leaseholders. As the requirement for a leaseholder to be resident in their flat has now been abolished, owners who do not actually occupy their flats (i.e. investors) and companies can now participate in the right to buy the freehold. (**Please note that there are certain specific exceptions to the above statements. For more details, please contact us here at Huggins). Often, if there are many qualifying leaseholders proceeding with the purchase, to assist in the administration and decision making, it is advisable to set up a company to buy the freehold in which all those participating are shareholders (“the Nominee Purchaser”). To comply with the laws governing private companies, there must be at least two Directors and one Company Secretary. At Huggins we can advise upon and incorporate a limited company on your behalf for this purpose. Cost You will have to buy the freehold from your Landlord and the premium payable is based upon a complex valuation based on factors including the income received from the ground rents, the potential value to the Landlord of granting lease extensions to tenants in the future (“hope value”), the value of the freehold once all the leases have expired (“the reversion”) and, where leases have fewer than 80years left on the term, 50% of the increase in value of the block which occurs when the leasehold and the freehold interests become owned by the same people (“marriage value”). As a realistic price must be put forward to the Landlord by those of you participating in the purchase we would advise that a professional valuation is obtained by a reputable Surveyor. Here at Huggins we have a good working relationship with several firms experienced in the requirements of enfranchisement valuations and their charges normally range from £450 - £800 plus VAT depending on the size and complexity of the block. You will also have to pay the Landlord’s reasonable legal and valuation costs incurred in the transaction together with any Stamp Duty Land Tax and Land Registry fees. Our costs are dependant upon several factors but will be based on advising you of your rights and carrying out the legal formalities involved in exercising your rights including the conveyancing, the complexity of which varies in relation to the size of the block. There will be an additional charge if we incorporate your limited company. If we can, we will approach your Landlord in the early stages with a view to negotiating the purchase on an informal basis, saving you both time and expense. If this is not possible however, either because the Landlord wishes to use the more formal statutory process, or because parties are unable to agree on the price for the freehold, we will be required to proceed with serving notices under the Act according to a strict timetable. If the Landlord refuses to participate in the process or agreement cannot be reached, we may have to enforce your rights at Court or make a claim at the Leasehold Valuation Tribunal. If you would like Huggins to act on your behalf in the exercise of your right to collective enfranchisement, we will be able to discuss more specific costs with you. At Huggins we can advise and guide you through the complex and technical statutory process of exercising your right to buy the freehold interest in your block and we look forward to discussing this opportunity with you. Please contact us on 0208 989 3000 or email tmurphy@huggins-law.co.uk (2) LEASE EXTENSION Under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002), as the leasehold owner of a flat in a block, you have the right to extend your existing lease by 90 years at a “peppercorn rent”. In effect this means that you will obtain a new lease for the remainder of your existing lease plus an additional 90 years with no ground rent to pay. The terms of the new lease (save for the term and the rent) will be the same as your existing lease. As mentioned previously, the value of your leasehold flat reduces as your lease comes closer to the end of the term – it is a ‘wasting asset’. This is important to consider if you want to sell your property in the future because mortgage lenders will not lend money to your potential buyer if the lease over your property has fewer than 70 years left, or they will lend but only on very unappealing terms. If you do not wish to or cannot qualify for collective enfranchisement, extending your lease as early as possible is a worthwhile investment. Equally, if your ground rent has substantially increased in accordance with a clause in your lease, extending your lease under the act would eliminate this extra expense. Qualification Generally, you will collectively qualify under the Act if:- your lease is a “long lease” i.e. the term is longer than 21 years (please note that there are different rules for business tenants and some specific shorter leases also qualify); and you have owned your flat for at least 2 years.** As the requirement for a leaseholder to be resident in their flat has now been abolished, owners who do not actually occupy their flats (i.e. investors) and companies can also now extend their leases. As you have a legal right, your Landlord may object to extending your lease only on very specific grounds. Your landlord can refuse to grant you the extension only if he can prove to a court that he intends to demolish and redevelop the building in which your flat is situate. This only applies however where the unexpired term of your lease is less than five years from the date when the notice was served. (**Please note that there are certain specific exceptions to the above statements. For more details, please contact us here at Huggins). Cost You will have to pay your Landlord for the right to extend your lease and the premium payable is based upon a complex valuation based on factors including the income received from the ground rent, the unexpired term remaining on your existing lease and, if your lease has fewer than 80years left on the term, 50% of the increase in value of the property which occurs when the leasehold and the freehold interests become owned by the same person (“marriage value”). As you must propose a realistic price for the extension, we would advise that you obtain a professional valuation by a reputable Surveyor. Here at Huggins we have a good working relationship with several firms experienced in the requirements of enfranchisement valuations and their charges normally range from £450 - £600 plus VAT depending on the circumstances. You will also have to pay the Landlord’s reasonable legal and valuation costs incurred in the transaction together with any Stamp Duty Land Taxes payable and Land Registry fees. Our costs are dependant upon several factors but will be based on advising you of your rights and carrying out the legal formalities involved in exercising your right, including the conveyancing. If we can, we will approach your Landlord in the early stages with a view to negotiating the extension on an informal basis, saving you both time and expense. If this is not possible however, either because the Landlord wishes to use the more formal statutory process, or because parties are unable to agree on the price for the extension, we will be required to proceed with serving notices under the Act according to a strict timetable. If the Landlord refuses to participate in the process or agreement cannot be reached, we may have to enforce your rights at Court or make a claim at the Leasehold Valuation Tribunal. If you would like Huggins to act on your behalf in the exercise of your right to extend your lease, we will be able to discuss more specific costs with you. At Huggins we can advise and guide you through the complex and technical statutory process of exercising your right to extend your lease and we look forward to discussing this opportunity with you. Please contact us on 0208 989 3000 or email tmurphy@huggins-law.co.uk " This guide is intended as general nformation only and it does not seek to summarise the relevant legislation which is a complex and technical area of law. This guide should therefore not be relied upon and you should take specific professional legal advice relating to your personal circumstances prior to proceeding with enfranchisement."