Should I buy my freehold? Right to Manage or Enfranchisement
They should check whether they:
- can group together and exercise the ‘Right to Manage’, or alternatively
- buy the freehold, using the process of ‘Enfranchisement’.
What are the benefits?
Both options enable the group to take control of the management function of the building which usually means they can make the decisions on what maintenance is done and at what price and find the best deals on buildings insurance. There is no need to show anyone is at fault to exercise these rights.
Why choose enfranchisement?
A well timed enfranchisement action can lead to big savings overall when the time comes to extend the leases. If the leases of the flats have 100 years or less to run, flat owners should look seriously at enfranchisement to preserve the value of the flats in the medium term. Once they own a share of the freehold, each flat owner should be able to extend their lease without paying anything other than their own conveyancing costs.
If the prospect of managing the building is off-putting, the group could always appoint a managing agent to deal with it.
So how do I organise an enfranchisement?
To enfranchise, the group of flat owners – who must form the majority of the ‘qualifying tenants’ – serves a legal notice on the freeholder and any other landlords. This notice must propose a price for the freehold, and must give the freeholder at least two months to respond. If the landlord doesn’t respond in time, the landlord will be bound by the proposals in the group’s notice.
As you would expect, groups of flat owners will tend to propose the lowest possible purchase price they can get away with to allow room to negotiate. Also, if the landlord misses the deadline, they will pick up a bargain so long as their notice is valid. You will have to be careful however, as an unrealistically low figure will invalidate your Section 13 Notice.
How then to pitch your opening proposal? The group of flat owners should take professional valuation advice from an Enfranchisement Surveyor. They should also engage experienced solicitors to get the technicalities of the notice and procedure right at the outset.
The law gives flat owners many rights - not all are covered in this blog. Whether you are a landlord, management company or tenant, if you need advice about enfranchisement, or any other aspect of your lease, contact our Property Disputes team on 0800 923 2070 or email [email protected].