The Leasehold Reform Act 1993 gives flat owners the power to join together to force the sale of the freehold using "Collective Enfranchisement". Then – usually via a company formed specifically for the purchase- the ownership of the freehold goes to all the participant leaseholders. This has particular attractions where the management of the building leaves something to be desired. The leaseholders can select managing agents directly accountable to them or decide to self-manage to avoid problems such as excessive insurance commissions or awarding contracts which can be too expensive.
Maybe more importantly, as the years go by, the time remaining on your lease reduces. Usually, lenders are reluctant to lend on leasehold properties with less than 60 years left to run. It is also important to know that once the lease has less than 80 years left to run the cost of extending increases notably. When the freehold is acquired, you can grant yourself a 999 year lease and reduce the ground rent to zero thereby enhancing the value and marketability of your flat.
Another possibility is using the right of first refusal that you and the other leaseholders usually have if the landlord sells the freehold to buy it and take advantage of the benefits described above, it is important to act on the notice received by the landlord or your right will be lost.
Right to Manage
If you do not wish to buy the freehold or do not have the funds to do so, the Commonhold and Leasehold Reform Act 2002 gives flat owners with a Right To Manage ('RTM'). Leaseholders will be able to run all the affairs and make their own decisions about the management and upkeep of their flats, including insurance, repairs, service charges and maintenance.
You do not need the landlord’s consent and there is no need to prove mismanagement by the landlord or the current managing agent neither. The leaseholders -via an their own RTM company- have control and in a number of cases may save considerable sums on items of expenditure possibly improving and value of their property.
The Statutory right to extend your lease
If you have owned your flat for two years you commonly have the legal right to extend the lease on payment to the landlord of an amount calculated using a statutory formula. This can be done on an individual basis and as such you are not dependant on others. It is a comparatively simple process and useful if the entire building does not qualify for collective enfranchisement or where the requisite number of tenants to collectively enfranchise cannot be obtained.
Ground rent is reduced (effectively you will not pay any ground rent at all). The lease is extended by 90 years which is adequate, however, is not the 999 year lease which participating tenants under the collective enfranchisement procedure normally grant themselves.
We advise to be proactive and act now to protect your lease and investment, as the longer you wait the more expensive it will become. The process of extending your lease and buying the freehold can take more than weeks, a sale could be delayed if the buyer or their lender insists on the lease being extended.
We hope you have found this information useful, however, if you require further assistance, please do not hesitate to contact Daniel O’Doherty, Our Leasehold Enfrancisement specialist at Amphlett Lissimore on 020 8771 5254 for a free initial assessment of your legal matter.