Most lessees (nb not tenants) have the statutory right to purchase the freehold of their building, called Collective Enfranchisement, under the Commonhold and Leasehold Reform Act 2002.
Such a purchase certainly has its appeal if your lease is beginning to look a little light – say 80 years or less. In this instance, it may be worth considering buying the freehold now as the cost of doing so in the future will escalate dramatically as the years go by under a process called reversion, alongside an associated depreciation in the market value of your remaining lease.
One important condition of such a purchase is that at least half of the lessees in a building participate in the purchase. Any lessee who does not wish to take part is deemed to have forfeited the right to do so in the future.
Start by calling a lessees’ meeting and appoint a solicitor to draw up a participation agreement and a specialist surveyor to prepare a valuation. A formal notice requiring the freeholder to sell will then be served which must be accepted by the freeholder within two months or the tenants can force the sale through the county court under a Vesting Order.
The issue of valuation can be extremely complex and requires specialist advice as it depends on numerous variables and precedents with over twenty valuation models in use! The freeholder may of course disagree with the valuation in which case the matter can be referred to the Leasehold Valuation Tribunal for a decision although this can be costly for both sides.
It is likely that your solicitor will advise that the purchase be made through a trust or limited company whereby shares in the company which owns the freehold are subsequently transferred from seller to buyer whenever the flat is sold in the future.
Neil Newstead, FARLA MNAEA
CEO – Oakfield Estate Agents