There are two types of property ownership, freehold and leasehold. Freehold is when someone has outright ownership of the property, including the land it is built on, with no time limit to the ownership. Leasehold is when someone owns the property for a fixed term (as set out in the lease) but not the land on which it stands, with the ownership of the property reverting to the freeholder at the end of the lease term unless the lease is extended. The value of leasehold properties can depreciate as the lease expiry date gets closer, making them less desirable and challenging to sell.
Leasehold enfranchisement is the process you go through to either extend your lease or purchase the freehold. In most cases, however, leasehold properties are blocks of flats. Therefore, it will be necessary for a majority of the leaseholders to agree to purchase the freehold together outright. In these circumstances, it is known as collective enfranchisement and will likely be more cost-effective than each leaseholder extending their lease individually.
What is enfranchisement?
Enfranchisement refers to a transaction in which a leaseholder purchases or extends their lease to the freehold of their property. For many years the Government has been working on improving the rights of leaseholders, creating a fairer housing system and levelling up opportunities for more people.
On 9 November 2022, Lucy Frazer, the Minister for Housing and Planning, responded to a PQ on progress in introducing leasehold reform. She said:
“The Government has committed to making enfranchisement cheaper for leaseholders by reforming the process of valuation leaseholders must follow to calculate the cost of extending their lease or buying their freehold.
The Government has already legislated via the Leasehold Reform (Ground Rent) Act 2022 to protect future leaseholders and we are due to bring forward further leasehold reforms later in this Parliament.”
Future legislation will:
- Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
- Abolish marriage value.
- Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
- Keep existing discounts for improvements made by leaseholders and security of tenure.
- Retain the separate valuation methodology for low-value properties known as “section 9(1)”.
- Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
- Allow for redevelopment breaks during the last 12 months of the original lease or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
- Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.
What is collective enfranchisement?
Collective enfranchisement refers to the purchase of the freehold of a building containing multiple flats/apartments. It is the right outlined in the Leasehold Reform Housing & Urban Development Act 1993, for leaseholders of a building or part of a building that contains flats to buy the freehold of that property collectively.
What should I do if I want to extend or purchase my lease?
Extending or purchasing your lease can be a lengthy and complex process, and there are several processes and obligations you will need to be aware of, along with a strict timetable that must be adhered to by all parties. It is, therefore, vital to seek expert legal advice if you are considering extending or purchasing the freehold to your property. Our experienced Landlord and Tenant team are specialists in leasehold enfranchisement. We have the knowledge and expertise to guide you through all the legal requirements and can advise on matters including:
- Lease extension
- Collective enfranchisement
- Freehold purchase of a house
- The right of first of refusal
- The right to manage
Enfranchisement solicitors Portsmouth and Waterlooville
Our specialist Landlord and Tenant solicitors will advise you on all costs and obligations and will help you determine your eligibility, and guide you through the complex statutory provisions. To speak with one of our specialist landlord and tenant team, please call on 023 9244 8100 or make an online enquiry. You can also contact one of the team directly by clicking on the links below:
- Richard Hopgood on rh@larcomes.co.uk
- David Sumner on dms@larcomes.co.uk
Please note that this article is not intended as legal or professional advice; it is for general guidance only, and updates to the law may have changed since it was published.