Received A Section 13 Notice Or A Request For The Sale Of Your Freehold?
The Leasehold Reform, Housing and Urban Development Act 1993 entitles qualifying leaseholders to band together to buy their freehold. This process is sometimes known as freehold enfranchisement or collective enfranchisement.
If you are a landlord who has been served an S13 notice, it’s important to seek legal advice quickly so you can negotiate with your tenants and reach a fair agreement.
What Is A Freehold?
A freehold is the complete ownership of a piece of land and all immovable structures built on it. Leaseholders will usually pay service charges to their freeholder (landlord). They will also pay buildings insurance premiums and ground rent.
A leaseholder (tenant) may choose to buy the freehold so they can be responsible for maintaining the property and the land themselves.
Leaseholders of flats have a combined legal right to buy the freehold of their building. They can’t do this alone: at least 50% of the leaseholders in the block must wish to jointly own the freehold. This is the right of freehold enfranchisement, and it means that the leaseholders can become their own freeholders.
What Is A Section 13 Notice?
A Section 13 notice is the formal notice which starts the official statutory collective enfranchisement process.
If you are a landlord, this is likely to be the first notice you receive that your tenants intend to buy the freehold.
What Are The Tenants’ Responsibilities?
In order to exercise their right under Section 1 of the Leasehold Reform, Housing and Urban Development Act 1993, the building and its tenants must meet certain criteria:
- There must be at least two flats in the building
- At least two-thirds of the flats in the building must be owned by qualifying tenants (a qualifying tenant is one who has a lease that was in excess of 21 years when it was first granted)
- At least 50% of the leaseholders must take part.
If the building and the participating tenants meet the conditions, the first step is for them to send a Section 13 notice to the landlord.
The notice must be served correctly to the relevant person. It must contain specific information for it to be valid.
This information includes:
- Details of the property to be acquired, including a plan
- A statement of the grounds which enable the premises to qualify for the right
- Details of any leasehold interests to be acquired
- The proposed price to be paid for the freehold
- Full names and addresses of all the qualifying tenants, details of their leases
- The name and address of the nominee purchaser
- The deadline date for a counter-notice to be served (this is the landlord’s chance to object to the freehold being sold; any counter-notice must be served within two months of receipt of the original Section 13 notice).
What Are The Landlord’s Responsibilities?
Once you receive a Section 13 notice, you are immediately working against the clock.
The Section 13 notice will specify a deadline for a counter-notice to be served. If you fail to act, this could result in the freehold being sold for the price and terms proposed by the tenants.
Don’t delay – seek expert legal help right away.
A solicitor will review the notice to ensure it is valid and – if it is – a surveyor can be instructed to value the freehold on your behalf. This will ensure that you can provide a counter-offer alongside your counter-notice within the required time.
What Is The Legal Process?
Once you respond the tenant with your counter-offer, the price and terms must be agreed within six months of the S13 notice being served. Solicitors on both sides will then agree the terms of the new lease.
Upon agreement of the terms, there is a further four months to complete the process.
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