purchase of the freehold by a group of leaseholders

What are the Leaseholders' rights?

The Leasehold Reform, Housing and Urban Development Act 1993, amended by the Commonhold and Leasehold Reform Act 2002 entitles a group of Leaseholders to purchase the Freehold of their building subject to the following:

a) the building must have a minimum of two flats

b) purchase is not possible if the Freeholder lives in the building, which was originally converted by him and there are less than 5 flats

c) the Leaseholders' original lease terms must be greater than 21 years

d) there is no minimum ownership period

e) Leaseholders need not be resident

f) at least 50% of Leaseholders must participate

g) up to 25% of the building floor area may be non-residential

What is the cost of Freehold?

This is assessed in three parts:

a) the value of the ground rent income

b) the value of the Freeholder's reversion at the end of the leases

c) 50% of the 'marriage value', i.e. the increase in the value when the Freehold and Leasehold interests are combined or 'married together'

Leaseholders pay the Freeholder's legal costs, valuation costs and Stamp Duty

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How is the price agreed?

The Leaseholders form a 'right to enfranchise company' and their solicitor serves notice making a monetary offer for the freehold.  The Freeholder either accepts the offer or serves a counter-notice giving his asking price.

The parties then negotiate a price, but if they fail, either may apply to the First-tier Tribunal (Property Chamber) to determine the price.

Calculating price

We can assess the price for the either party following an inspection and perusal of documents including leases.

Negotiating the price

We can negotiate the price for either party.

How much are valuation and negotiation fees?

Valuation fees and negotiation fees vary from case to case. We provide fee quotations if given basic details.  Applications to the First-tier Tribunal (Property Chamber) are charged at an hourly rate.

How do I obtain further information?

These notes provide general information.  Please telephone us for details in specific cases.

James Flynn Surveyors?

We are an independent firm of surveyors and have been advising clients on all aspects of property value and condition since 1980 from our offices in London, Surrey, Hampshire, Sussex and Kent.  We mainly cover the London and South East region but travel further afield when this is requested.

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