Leasehold Property Professionals
029 2066 7750 Park House, PO Box 2521, Cardiff CF23 0GP
Flats - Collective Enfranchisement
For the tenant, a leasehold flat will be a wasting asset. The lease will allow the tenant to remain in the flat, usually paying ground rent to the landlord for an agreed number of years. Sometimes the agreed number of years – “the term” is so long that the tenant should have no real concerns – 250 years or even 999 years. Where the term is shorter, however, the tenant may well be advised that it is a good idea to seek an extension of the lease.
Further, the tenant of the flat may well find that a third party is responsible for quite major elements of the management of the entire block. They may not approve of decisions the landlord or managing agent may make and may find other methods of challenging these complicated and unsatisfactory.
For the landlord, a leasehold flat or block of flats may well be an attractive investment promising good returns. As property prices rise, which over the medium to long term has been the clear case in the UK, the landlords’ investment will rise as well. Further, as the lease gets short the prospect of the lease ending and the property being returned to the landlord – “the reversion” gets closer then values will also start to rise, the prospect of having a potentially valuable flat returned to the landlord in 10 years is clearly more valuable than having to wait 250 years! The landlord therefore benefits twice – once as property prices go up and once as the lease gets shorter and the reversion nearer.
There are some key dates both tenant and landlord should be aware of. When there is less than 80 years left on the lease then statute allows for the inclusion of a concept known as “marriage value” should the lease be extended, usually meaning that the tenant will pay more and the landlord will receive more. When there is less than 60 years left on the lease then the property may be VERY difficult to mortgage.
It is possible, under certain circumstances, for the tenants of a block of flats to compel the landlord to sell them the entire block on a freehold basis – this is known as “collective enfranchisement”. The Leasehold Reform, Housing and Urban Development Act 1993 may allow groups of qualifying tenants to purchase their freehold. When they do so they may not only take over the management of their block, but may also grant themselves far more valuable 999 (a virtual freehold) leases.
Bureau Property Consultants represent both tenant and landlord for collective enfranchisement under the 1993 Act throughout England and Wales. Bureau Property Consultants have worked with both local and national law firms with regard to this potentially difficult procedure and can advise on every aspect of the process from an initial explanation of the likely issues involved, through valuation and instruction of solicitor, to negotiation with the other parties surveyor right through, if necessary, to making an application to, and appearing before, a Leasehold Valuation Tribunal.