Purchasing the Freehold
(Also known as Collective Enfranchisement)

Eligibility Criteria
To be part of buying the freehold at your block 50% of the flats within your block will need to participate. For example, in a block of 12 flats 6 of those would be required to proceed. The matter can proceed whether the other 6 want it to go ahead or not.

If you own a flat in a block but do not live in it, for example you may rent it out or it is your holiday home, you are still able to be part of the process.

You do not need to have owned your property for any specific period of time. Therefore you can buy a flat one day and become part of the purchase of the freehold process the following day.

What you will achieve
Once the statutory process is completed you will have:-

• A share in the Company that owns the freehold
• A lease extended to 999 years at a peppercorn ground rent
• Any other amendments that it is agreed are required to the flat leases of your block

Procedure

• A Limited Company is formed to undertake the purchase on behalf of the participating flat owners.
  At the end of the process each flat owner will be a shareholder in that Limited Company.
• At least 2 volunteers from the participating flats are appointed as Company Secretary and Company Director of the Limited Company.
• The individual flat owners enter into a Participation Agreement with the Company.
  Whilst not strictly part of the statutory process the purpose of the Participation Agreement is to set out the rights and obligations of both the participants as individuals and the Company.
  In particular it provides for all the participating flats to divide their funds in the agreed proportions and it also provides a decision making process if a vote is needed on a particular issue.
  An individual flat owner will want to be certain as to what will happen during the process, in particular they will not want to start the process thinking they are going to pay one tenth of the cost of the process along with the other 9 flat owners, only later in the process to find that 2 parties have dropped out meaning they now have to pay one eighth of the total cost which may be a substantial increase.
• A statutory Notice called an Initial Notice is prepared and served on the freeholder and any intermediate landlord.
  The Notice contains certain required statutory information but most importantly the offer figure your valuer has recommended you should make for the freehold.
• Once the freeholder receives the Initial Notice he can ask the flat owners to prove they own their property in the names that are specified in the Initial Notice.
• The freeholder will also instruct a valuer for the purposes of inspecting and valuing the premises.
• The freeholder will prepare and serve a Counter Notice in response to the Initial Notice.
  The most important point in the Counter Notice is the counter proposal to the offer figure. The offer figure in the Initial Notice would have been intentionally lower than your valuer's advice and the freeholder's Counter Notice would contain a counter proposal intentionally higher than his valuer's advice.
  The Counter Notice has to be served by the date specified in the flat owners' Initial Notice. The date in the Initial Notice must have allowed the freeholder a period of at least 2 months to respond.
• Once a Counter Notice has been served the parties' valuers will open negotiations on price and attempt to agree a figure.
• If the matter can be settled by agreement then the transfer of the freehold will proceed as a standard sale/purchase transaction.
• If price cannot be agreed between the valuers then one of the parties will need to make an application to the Leasehold Valuation Tribunal for a determination.
  The application to the Leasehold Valuation Tribunal has to be made before the expiry of 6 months after the date of the Counter Notice, otherwise the flat owners' Initial Notice will be deemed withdrawn and they will not be able to serve another one for a period of 12 months.
  About 98% of cases settle by agreement and a Leasehold Valuation Tribunal. Application is not necessary.

Amending and Extend Your Lease
Once the purchase is complete you will still own a leasehold flat but you will also have a share in the Company that owns the freehold of the entire building.

Flat owners may wish to extend their lease length and reduce their ground rent to a peppercorn and possibly make other changes or modernisations to the existing lease.

There are 2 ways of doing this. By a simple Deed of Variation which does not alter any provision of the existing lease apart from the length and the ground rent, or alternatively a new long lease in modern form at a peppercorn ground rent could be drafted and granted.

Intro. Leasehold property

>1. Purchasing the freehold

2. Extending your lease

3. What will it cost?