The Collective Enfranchisement Procedure

What is the freehold purchase procedure?

• Both the leaseholders and the freeholder should obtain an independent valuation of the cost of freehold purchase (the premium). Pro-Leagle provide a competitive freehold valuation service.
• The parties then negotiate to agree the terms of freehold purchase. Pro-Leagle provide negotiation services to help achieve the best outcome possible.
• If negotiations stall, the leaseholders can compel the freeholder to sell the freehold. This is legally known as Collective Enfranchisement. Pro-Leagle offer Collective Enfranchisement Eligibility Assessments prior to starting the formal freehold purchase process.
• Participating leaseholders must decide how they are going to purchase the freehold as a group. A Collective Enfranchisement company is usually incorporated which is called the "Nominee Purchaser" in the formal purchase process. Ideally all leaseholders should be invited to join in.
• Once the formalities have been taken care of, including a Participation Agreement and Valuation report, The freeholder can be served with a Section 13 Tenant's Notice of Claim under the Leasehold Reform Housing & Urban Development Act 1993 (as amended), stating the proposed premium. The freeholder must respond to this by way of Secton 21 Counter Notice within a set time-frame. Once the Section 13 Notice has been served, the leaseholders become responsible for the freeholder's "reasonable" legal and surveyors costs.
• Pro-Leagle provide a full Collective Enfranchisement management service
• When using the statutory route, if the premium, terms and/or freeholder's legal/valuation costs cannot be agreed the matter may be referred to the First-tier Tribunal (Property Chamber) for a decision. Pro-Leagle provide legal assistance in the Tribunal.
• Once the premium, terms and costs have been agreed and paid, the parties can arrange for completion of the sale. Upon completion the freehold is then granted to the Nominee Purchaser. New leases can be granted to the leaseholders with an extended term of 999 years and 'peppercorn' ground rent.

What are the likely costs involved?

• The leaseholders' own valuation and legal costs.
• The leaseholders must also pay the freeholder's legal and surveyors costs. If taking the informal route it is unlikely that these will be negotiable. For the purposes of statutory Collective Enfranchisement these costs must be "reasonable" and can be challenged in the Tribunal. Leaseholders are not generally required to pay the freeholder's legal costs in relation to proceedings at the First-tier Tribunal (Property Chamber).
• Any service charge amounts due to the freeholder or their Managing Agents will need to be paid before completion. If there is any dispute about service charges, this can be determined by application to the Tribunal. Pro-Leagle offer a range of service charge dispute services.
• If service charges are a contentious issue, it may be worth leaseholders considering undertaking Right to Manage in parallel to Collective Enfranchisement. This transfers management rights from the freeholder to the leaseholders. Right to Manage can potentially complete more quickly than Collective Enfranchisement and can help prevent service charge issues from delaying the Collective Enfranchisement process.
• Payment to a Managing Agent service to manage the property on your behalf.

How long does it take?

• If all goes smoothly and the premium and costs are agreed informally between the leaseholders and the freeholder, the process could take approximately two months.
• If the statutory route is required and the premium/terms/costs cannot be agreed, application to the First-tier Tribunal (Property Chamber) and even County Court may be necessary. In this case the process could take up to twelve months or more.
• Complications with individual leaseholders can also result in a delay in Collective Enfranchisement.