Tenants of residential long leases generally enjoy rights to extend the term of their lease. They may also enjoy rights in respect of the management and ownership of the freehold property. Within the legal profession, these rights, or the processes within which these rights are exercised, are known as ‘leasehold enfranchisement’.
The following are examples of common questions that arise in the context of leasehold enfranchisement:
How can I extend my lease?
There are two ways to extend your lease:
Informal negotiations with the freeholder. It is for the parties to agree the term of the extended lease and the price payable.
By exercising rights available to you as a tenant under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). This involves serving a formal notice on the landlord, exercising your right and proposing a premium payable for a lease extension of 90 years.
How can I buy the freehold of the property in which I am a leasehold owner?
There are two ways to buy the freehold:
If the leaseholders qualify for a right of first refusal under the Landlord and Tenant Act 1987 (the 1987 Act), the landlord has an obligation to offer to sell the freehold to the qualifying tenants before disposing of it to a third party.
Subject to meeting the criteria under the 1993 Act, participating leaseholders can pro-actively serve a Section 13 Notice on their landlord proposing the sale to a nominee purchaser.
My landlord is proposing to sell the freehold of my building. What can I do?
Assuming your landlord serves a notice on the qualifying leaseholders of their intention to sell, speak with your fellow leaseholders. The notice will propose the premium that the freehold owner wishes to be paid for the freehold. If more than half of the ‘qualifying tenants’ wish to exercise their right to buy, those leaseholders must serve notice on the freehold owner, confirming their acceptance of the freeholder’s offer.
Strict timescales apply. You should also consider how the purchase will be managed; who will become the legal registered owner; and in what proportions will the premium be paid by the participating tenants.
The management company is poorly performing. What are my options?
1. Do nothing.
Live with a poorly performing management company. Not a terribly attractive option!
2. Informally invite the freeholder to replace the management company or demand improvements of its services going forward.
This may or may not prove effective.
3. Formally claim the right to manage to replace the poorly performing management company.
The Commonhold and Leasehold Reform Act 2002 (the 2002 Act) introduced a formal right to manage. Subject to meeting the criteria, the 2002 Act entitles a group of leaseholders in a block of flats to form a right to manage company (a RTM company). The RTM company can serve notice on the landlord claiming the right to manage.
Following successful acquisition of the right to manage, the RTM company would then receive the service charges payable under the leases, and take over decision-making powers for the maintenance, repair, and collection of charges in place of the existing management company.
We are here for you
Leasehold enfranchisement can be a minefield for both tenants and landlords. It can be beneficial securing early, reliable legal advice as there are strict and varying timescales applicable under the Acts. There are defined eligibility thresholds to consider and in some situations a liability to meet a landlord’s professional costs. Therefore, both landlords and tenants should proceed with caution, and be aware of the processes beyond just eligibility and the initial notice stage.
The Property Disputes Team regularly advises both landlords and tenants in relation to leasehold enfranchisement matters. If you require professional advice, contact a member of the team.