If you and your fellow leaseholders have done a considerable amount of work to prepare to exercise your right to collective or leasehold enfranchisement and buy the freehold of your block, having the freeholder refuse your application is incredibly frustrating. While normally you will indeed have a legal right to buy your freehold, unfortunately, there are certain very limited circumstances in which a freeholder can refuse to sell the freehold. To ensure you are prepared for this type of event, below we explain why.
Is Your Freeholder Refusing To Sell The Freehold? Do you think they have got it wrong? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice – with no strings attached.
UPDATE: The Leasehold Reform (Ground Rent) Act 2022 came into effect on June 30, 2022. Although it does not affect existing leases, under the new legislation, any NEW lease cannot include a charge for ground rent. This makes freehold ownership of new leases much less desirable. We suspect this is leading to an increasing number of freeholders looking to sell up.
Why you need a specialist leasehold solicitor – and how our team can help.
Enfranchisement and the right of 1st refusal both involve a complex area of law. Both involve strict timetables for example – and missing a date could mean your application to buy your freehold fails entirely. Few property solicitors get involved with these areas on a regular basis, if at all.
But our specialist leasehold team is different. The 5 strong team only deal with the right of 1st refusal, freehold purchase and lease extensions – and they do so for clients throughout England and Wales. And as a result we have helped something like 10,000 people like you extend their lease, buy the freehold of their house or block or exercise the right to manage.
And our specialist status is confirmed by the HomeOwners Alliance – the nation’s leading organisation fighting for the interests of the country’s homeowners. We are the only solicitors they recommend for lease extension, freehold purchase, right to manage and right of 1st refusal work.
So by instructing us, you can rest assured that you have a genuine freehold purchase specialist on your side.
What is leasehold enfranchisement?
Under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993), leaseholders of flats who meet certain eligibility criteria can purchase the freehold and any immediate leasehold interests of their building.
Leasehold enfranchisement is incredibly complex and without the advice of an experienced Solicitor, the process of buying your freehold can quickly go wrong, costing leaseholders considerable time and money. Therefore, it is always best to engage a Leasehold Enfranchisement Solicitor to manage the purchase process for you and the other participating leaseholders.
Click here to read more about lease enfranchisement
What are the advantages of leasehold enfranchisement?
Once the purchase of the freehold gone through, participating leaseholders can grant themselves long leases for a nominal price with little or no ground rent. Furthermore, the control of the building’s management can be transferred to a new build ownership company owned by participating leaseholders. In addition, being part of a leaseholder owned building increases the attractiveness of the leasehold flats to potential buyers.
When can a freeholder refuse to sell the freehold interest?
Under the LRHUDA 1993 leaseholders can purchase the freehold from the freeholder if:
· there are at least two flats in the building,
· at least two-thirds of the flats are let to ‘qualifying leaseholders’ i.e. their original leases were granted for a minimum of 21 years or more, and
· not more than 25% of the internal floor area of the building, excluding any common orshared parts, is non-residential. And that’s not always as straightforward as it might initially seem, and if this might apply, you’ll need the advice of a specialist solicitor – like us. For example, garages and parking spaces specifically used by flats in the building are considered residential.
If any of the above conditions are NOT met, the freeholder can simply refuse to sell the freehold.
It’s important to note, however that the LRHUDA 1993 does not give leaseholders an individual right to purchase the freehold of their flat. Instead, it allows number of the leaseholders to buy the freehold together, or collectively. In particular, leaseholders of at least half of the flats in the building need to join in the purchase.
And in addition to the grounds above, the freeholder can also justify a refusal to sell if either of the following applies:
- the leaseholder has a business or commercial lease
- the freeholder is a charitable housing trust and the flat is provided as part of the charity’s functions
- the building is within a cathedral precinct
- the property is owned by the National Trust
- the freehold includes any working railway track – which includes any tunnel, bridge or retaining wall to a railway track
There is also a theoretical objection if the property is owned by the Crown. Technically, Crown properties are excluded from the legislation, but the government has publicly stated that the Crown is however prepared to comply with it’s principles.
What is a nominee purchaser?
If over half the leaseholders agree to start the collective enfranchisement process, they will need to select a nominee purchaser to negotiate with the freeholder and purchase the building. The nominee purchaser is usually a company set up for the specific purpose of purchasing and later managing the building.
Selling the freehold – do the leaseholders have to pay the freeholder’s professional costs?
Yes, the nominee purchaser will be expected to pay any reasonable legal costs incurred by the freeholder, as well as the reasonable costs of any surveyor appointed by the freeholder to value the premium that the leaseholders will need to pay. In theory, if the freeholder’s legal and valuation costs are not reasonable, you could make an application to the First-Tier Property Tribunal to decide the right level of those fees. But knowing that, most freeholders fortunately don’t look to charge unreasonable professional fees.
What if the freeholder decides to sell the freehold on the open market?
If the freeholder decides to sell their freehold interest in the block of flats on the open market then they must provide the leaseholders with the right of first refusal. For the right of first refusal to apply, both the building and the leaseholders must meet the qualifying conditions. It’s worth noting that the right of 1st refusal though similar, is basically different from enfranchisement. In particular leaseholders cannot start the process off – they can only respond under RFR to an offer for sale from the freeholder. The only exception to that is if the freeholder looks to sell the property to a third party – not the leaseholders.
And it’s only a very foolish freeholder who ignores the right of 1st refusal and tries to sell the freehold on. why? That’s because failing to offer the the right of 1st refusal is actually a criminal offence, which if found guilty could land them with a fine of up to £5,000.
Click here to read more about the right of 1st refusal
I own the leasehold of a house, can I buy the freehold?
The Leasehold Reform Act 1967 states that provided certain qualifying criteria are met, a leaseholder can purchase the freehold of their home. Unlike collective enfranchisement, you will be able to purchase the entire freehold as opposed to a share of the freehold.
Click here to read more about how to buy the freehold of a house