Property law is highly complex – never more so than when dealing with lease enfranchisement and lease extensions. The legislation governing this process – the Leasehold Reform, Housing and Urban Development Act 1993 – has been subsequently amended several times and can be dense for the layperson to understand. In addition, the law of England is fairly unique in the way it deals with enfranchisement and extensions of leases. Therefore, it is vital that you seek expert legal advice to help you understand this area of law.
Below we outline some key points to note about the enfranchisement and lease extension process for flats. You should note that the process is slightly different if you are dealing with a house. However, our solicitors can offer insight and advice on all areas of property law. If you have any questions about this process, or any other residential property matter, please get in touch today. Our team will be happy to help.
The process
The Leasehold Reform, Housing and Urban Development Act 1993 deals with the right to extend a lease or buy the freehold of a flat, also known as enfranchisement. For flats, individuals have the right to extend a lease and groups have the right to collective enfranchisement (purchasing of the freehold). The processes for these transactions vary slightly and are dealt with separately below.
Collective enfranchisement
Collective enfranchisement applies to qualifying tenants who live in a block with at least two flats. If there are only two flats, both tenants will need to join the application. In all other cases, half of the tenants in the block must participate in the collective enfranchisement. Tenants cannot be forced to participate. Each flat can only have one qualifying tenant at any one time – so if you share a flat, as joint tenants, then you will jointly constitute the qualifying tenant of the flat.
Broadly speaking, to be a qualifying tenant for the purposes of collective enfranchisement, the lease must be for a fixed terms of more than 21 years - this kind of lease is known as a “long lease”. You cannot be a qualifying tenant if you are operating under a business lease.
The enfranchisement process can seem daunting. Generally, you will be required to form a company to buy the freehold and have the leaseholders involved in the process become members of that company. In forming the company, it is important that careful consideration is given to how decisions are made and how costs will be dealt with, to prevent disputes arising in the future. Our solicitors are well-versed in this process and will be able to assist you in both forming the company and drafting an agreement between the relevant leaseholders to govern their conduct and decision making.
The next steps in the process will involve notices being served in accordance with the 1993 Act and valuations being obtained. The terms of the acquisition will need to be agreed. Again, our solicitors will be able to assist you in organising this process and ensuring that you follow the correct procedures.
Lease extension
The legislative provisions relating to lease extension are also highly complex. Once more, it is vital that you seek expert advice when considering whether you want to engage with this process.
In short, under the 1993 Act, a qualifying tenant will have the right to extend their lease for a further 90 years, in addition to the current term. You must be a qualifying tenant – meaning, as above, that you will have a long lease for 21 years or more – and additionally you will need to have owned your flat for at least two years. The two year ownership requirement is not present in collective enfranchisement. Also unlike with collective enfranchisement, you can act alone to extend your lease. However, as with collective enfranchisement, the lease in question cannot be for business purposes. The extension will require you to pay a premium and a peppercorn rent. The Act provides how the premium will be calculated.
As with lease enfranchisement, there is a complex procedure of notices which must be followed. Generally the lease will be on the same terms before, apart from the term and payment of peppercorn rent.
There can be very significant costs involved in the process – as you will be responsible for your own costs and your landlord’s reasonable costs. It is for this reason in particular that a solicitor should be consulted, to help you understand the full implications of embarking on the transaction.
Get in touch
The enfranchisement and lease extension process can be both complex and challenging. Seeking advice to help you understand your rights is important – it will save you time and stress and allow you to make an informed decision about your future. Our team at Lewis Nedas can offer specialist support in plain language English. We will help you navigate the process, and decide what is right for you and your home. We can assist you in understanding the cost implications of the transaction and can liaise with the relevant parties on your behalf. The process can be time-consuming and deadlines are crucial. We can deal with the day to day administration to ensure that the process is efficient and does not fall behind or incur unnecessary costs.
At Lewis Nedas, our team of Property Solicitors have broad experience in all areas of residential property law. To speak with one of our Property Lawyers, please contact us on 020 3811 3589 or complete our online enquiry form.
