The 1993 Leasehold Reform Housing and Urban Development Act (as amended) gives a flat owner the right to buy the freehold interest in their flat, so long as the building qualifies and at least 50% of the flat owners are participating. To qualify, a building must contain two or more flats, have no more than 25% commercial floor area and have the ability to be redeveloped.
The Act lays down the following procedure for buying the freehold interest, known as enfranchise.
i) A flat owner serves an initial notice on the landlord stating what the building is, the number of flat owners participating and the price, which has to be reasonable.
ii) Within two months, the landlord is required to serve a counter notice acknowledging the flat owner’s right to enfranchise.
iii) If there is a dispute over the price, the flat owner then has six months within which they can apply to the Leasehold Valuation Tribunal (LVT), which will determine the price to be paid.
iv) Once the price has been agreed, the freehold interest is transferred from the landlord to a company set up by the flat owners. This is dealt with by the solicitors
Within the six months mentioned in (iii), the first two months are set aside as a cooling off period designed to get the valuers for both parties together to see if an agreement on price can be reached. Around 90% of the time, a compromise can be reached.
Once the freehold interest has been transferred to the flat owners, they will have control over the building or employ a managing agent to look after the management of the building for them. All participating flat owners will be given one share in the freehold company and when the flat is sold their share in the company is sold with it.
Enfranchising should cause the flats to increase in value and be more saleable, as you cannot get better than a share of the freehold.