Buying Freeholds
The Leasehold Reform Act 1993
The Leasehold Reform Act 1993
This piece of legislation, often called collective enfranchisement, gives flat leaseholders the right to join together to buy the freehold of their property.
To qualify, the leaseholders need to meet certain conditions including that no individual owns more than two flats in the building, the leases when originally granted were for a length in excess of 21 years and that the number of leaseholders who agree to buy the freehold is no less than half the number of flats in the building, or in the case of a building with only two flats then both leaseholders need to agree. To further qualify, the building also need to meet certain conditions and these include that it contains at least two flats, that at least two thirds of the flats are owned by qualifying leaseholders and that no more than 25% of the building is used for commercial purposes i.e. any use that is not residential. As with all things legal there are exceptions and you need to take legal advice.
If the property in question is a house then to qualify you need to have held the lease for at least the last two years, the lease when it was originally granted was for a length in excess of 21 years and the lease must cover the whole house, not just an individual flat or maisonette.
Please note that unlike collective enfranchisement for a house, there is no requirement for flat tenants to have owned their leases for at least two years.
The other possible way of leaseholders gaining the right to become freeholders is called the Right of First Refusal.
This is allowed for under the Landlord and Tenant Act 1987 as amended by the Housing Act 1996
In a nutshell, this requires a freeholder who wishes to sell their freehold interest to first of all offer it to the leaseholders. This is known as the right of first refusal. This only applies to flats, it does not apply to houses occupied as single dwellings, but of course will apply to a house converted into flats.
The freeholder is required to tell the leaseholders the price and terms for buying the freehold interest. The leaseholders can only accept or reject the offer, they are not legally entitled to negotiate a different one. If the offer is rejected then the landlord can make exactly the same offer to a third-party. However, if the landlord changes any part of the offer to a third-party then he must reoffer it to the leaseholders again on the same terms as the revised offer.
To qualify, the leaseholders must meet certain conditions including either being a regulated tenant or the original lease being longer than 21 years and with no one leaseholder owning more than three flats in the building. A leaseholder who has an AST or assured tenancy does not qualify. In addition, the building must meet certain conditions and these are that it contains at least two flats, 50% or less of the building is in commercial use i.e. not residential, and that more than 50% of the flats are owned by leaseholders who qualify.
For any offer made by the landlord to be accepted requires more than 50% of the qualifying leaseholders to agree to it. The price is set either by the landlord or by auction if the landlord decides to sell that way. There is no right for the price to be determined by a Valuation Tribunal or any other third party. The leaseholders cannot force the freeholder to sell or accept what might be called a market value for the property. To do this the leaseholders must use the Leasehold Reform Act 1993.
The relevant legal notice that must be served on the interested parties is a Section 5 notice. You will see this mentioned in marketing particulars or auction catalogues which deal with the sale of properties where this law would apply.
Where the freeholder has not given the right of first refusal to the leaseholders and sold elsewhere the leaseholders remedies include forcing the new buyer of the freehold to sell the property to them at the price that new freeholder had paid.
Regulated tenancies offer interesting opportunities for investment, if you know what you are doing.
What to profit from this legislation.
Read How To Make Money in Residential Property
by: Joseph Hurst
Tips For Buying Maternity Bras Buying Reasonably Priced Custom Made Bridal Gowns Can You Get Banned For Buying Gold In Mists Of Pandaria 2012 Buying The Correct Blinds Documents To Be Tested Before Buying Property Make Sure You Have Followed Below Points While Buying Water Heaters Buying Rabbit Hutches Choices In A Rabbit Hutch Or A Rabbit Run Wholesale Barbecue Grills - Tips Followed While Buying Charcoal Barbecue Grill Points To Consider While Buying Safes Considerations While Buying An Unlocked Htc You Must Sell Where People Are Buying! Buying Cheap Nfl Jerseys Buying Property In Mohali A Remunerative Option With Good Roi Value