How many leaseholders do you need to buy the freehold?

To purchase the freehold of a leasehold flat you need a minimum 50% of the leaseholders to buy with you. Here is a chart to help: Number of Leaseholders Within the Freehold Minimum number of qualifying leaseholders 2 2 3 2 4 3

What happens if I have an absent freeholder?

Even when a landlord cannot be found, it may not adversely affect the leasehold enfranchisement process. In some situations, you may not even need to serve an Initial Notice and in others you may need to apply for a vesting order. Read more - What to do when you have an Absentee Freeholder

Is it easy to buy freehold?

The process to buy your freehold is not an easy one for the following reasons: it can take between 4 to 8 months to complete (longer if you need to go to Tribunal); it is costly as you pay for your costs, the freeholder's costs and the premium to buy the freehold; and You need to manage 50% or more of the leaseholders involved. If this is more than 4 then you'll find it hard to keep everyone communicating and doing what they need to do.

What is a Qualifying Leaseholder (Tenant)?

A qualifying tenant must have a lease which was originally granted for more than 21 years - i.e. a long lease or if the original lease was for less than this, then it must include a clause giving the right of perpetual renewal. Even if you satisfy the above criteria, you won’t count as a qualifying tenant if: Your landlord is a charitable housing trust and your flat counts as part of the charity’s functions. You or any tenant own more than 2 flats in the building, either jointly with others or solely in your name. If this is the case, these flats won’t count towards the ‘two-thirds’ mentioned above. You or any tenant have a business or commercial lease. More than 25% of the internal floor area of the building, excluding any common parts, is neither used nor intended to be used for residential purposes. This is known as the 25% non-residential rule and includes shops and offices etc. However, garages and parking spaces allocated to flats in the building ARE classed as residential.

How do you draft a Participation Agreement?

When buying the freehold of a leasehold flat you should get all participating clients to enter into a participation agreement.This agreement should address how you conduct your joint action regarding matters including voting, negotiation, agreement of terms and how much each tenant has to contribute. Having an agreement is particularly important with large groups of participating tenants because coordinating them to complete required actions within set deadlines can otherwise prove a huge challenge and might put the action in jeopardy. The agreement should also address what will happen at the point when the freehold is acquired. It may be decided, for example, that the new freeholder then grants new leases to all participating tenants – this a common practice and often seen as the main point of taking the lease enfranchisement action.

How do you choose a Nominee Purchaser to buy the freehold?

The Nominee Purchaser, named in the Initial Notice, acquires the freehold and becomes the new landlord if the process completes. You should decide who this is at an early stage because they will become the manager of the building. If you choose to set up a company then this needs to be set up and incorporated before serving your section 13 notice. Along with other participating tenants, you are free to decide who the Nominee Purchaser is. They can be, for example: a person; one of the tenants; a corporate person; a trust; or a company you form with the tenants for the purpose. This is the most common option as it allows for a number of leaseholders to manage the company and share the responsibility of maintaining the freehold and adhering to the freeholder's obligations.

Can I force a leaseholder to buy the freehold of the flat?

A leaseholder can choose whether they want to buy the freehold of the flat. You cannot force a leaseholder to participate. You cannot force them to buy a share of the freehold.

Buying Freehold of Flat is the purchase of your freehold with SAM Conveyancing

We can help whether you are offered the freehold, or your are serving notice to buy it.

We have RICS valuers to confirm the price on offer and purchase of freehold solicitors for the conveyancing with Fixed Fees..

Buying the freehold of a flat

by:

Andrew Boast

(Last Updated: 29/05/2024)

Created on:

24/06/2023

Read by:

3,922

11 min read

The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes

Any qualifying leaseholders have the right to buy the freehold of their flats and maisonettes and there is no restriction on the length of time that you need to be a leaseholder. The legal term for this is Collective Enfranchisement Purchase of Freehold, however this simply means that the leaseholds are collectively buying their freehold. The process is different if you are a leaseholder of a house: Read more - Buying the Freehold of a Leasehold House.

The leaseholders will either:

Serve a Section 13 Notice on the freeholder to exercise their right to buy the freehold (explained below); or
Receive a Section 5 Notice from the freeholder offering them the freehold to buy (read more - How does the freeholder sell the freehold to the leaseholders?) .

Buying the freehold of a flat process

Step 1 - Check you have the right to buy the freehold

Step 2 - Get a RICS Freehold Valuation

Step 3 - Serve the Section 13 Initial Notice and receive Section 21 Counter Notice

Step 4 - Negotiation (if required)

Step 5 - Buy the Freehold Conveyancing

We explain each stage of buying the freehold of a block of flats in more detail below.

1

Check you have the right to buy the freehold

Check you are eligible
(if applicable) Complete a Participation Agreement
Choose the Nominee Purchaser

If you have 50% or more leaseholders to buy the freehold then there is no legal obligation for participating tenants to invite all possibly eligible tenants to take part in a freehold purchase but it generally pays to make people aware what's going on.

Eligible

Not Eligible

You have the legal right to buy the freehold when:

The freehold has at least two flats with two-thirds having qualifying tenants (read definition below; if there are only 2 flats then both must contain qualifying tenants)
There are a minimum of half the leaseholders buying the freehold (if there are only 2 eligible leaseholders then both must participate)

You do not have the legal right to buy the freehold when:

the building is a conversion into four or fewer flats
the building is not a purpose-built block
the same person has owned the freehold since before the conversion of the building into flats AND they or an adult member of his family have lived there for the past 12 months
the building is within a cathedral precinct
the building is a National Trust property
the building is a Crown property

Do you need a Freehold Company?

As a rule if there are more than 2 leaseholders buying the freehold then they should form a limited company and buy the freehold in the name of the company. Like all limited companies, the details are registered with companies house with appropriate memorandum and articles of association, share certificates, directors and filing duties.

If you do decide to set-up a company then you need to do it before serving your notice as the name of the company will need to be stated within the notice to the freeholder. Read more - What is a Leasehold Management Company?

2

Get a RICS Freehold Valuation

You need to instruct a RICS valuer to provide a valuation of what the freehold is worth. The valuer’s purpose is to:

provide a valuation that allows the leaseholders to put forward an offer in their section 13 notice;
ensure the leaseholders are aware of the cost of the premium prior to serving the notice; and
reduce the time and cost of putting forward an inaccurate premium (see Negotiations)

Read more - What is a freehold valuation?

The valuation date for the cost of the premium you pay, corresponds to the date the notice is served. This date is when many of the variables affecting the price of the freehold are set, such as present values of flats, years left on leases etc.

3

Serve the Section 13 Initial Notice and receive Section 21 Counter Notice

The Section 13 Initial Notice triggers the statutory process and from the date the landlord receives it, all participating tenants are jointly and severally liable for the landlord's reasonable costs. Read more - What are the reasonable costs of the freeholder?

Your solicitor registers the notice with the Land Registry to ensure that even if the freeholder sells the building to another freeholder, the new freeholder still has to respond in the prescribed way to the notice.

Do I need a solicitor when buying the freehold of a flat?

Whilst parts of the process can be undertaken without legal representation you are best to work with a solicitor who is qualified to handle the legal work; not many solicitors are competent to provide this service.

A risk if you choose to not instruct a solicitor is an incorrectly served notice. The Section 13 notice must be complete and without inaccuracies because even though you can apply to the county court to correct them, it will add a further cost to the process. An incomplete notice can be thrown out as invalid.

Landlord's Section 21 Counter-Notice

The landlord has to serve a Section 21 Counter-Notice by the date specified in the Initial Notice which can be no shorter than 2 months. Their notice must either:

Agree to selling the freehold and accept your terms or propose alternative terms; or
Not agree to the sale, giving reasons for the court to determine; or
Neither agree nor disagree to the sale, stating that an application for the landlord to redevelop all or part of the building is to be made to the court.

4

Negotiation

Negotiations start when you receive the freeholder's Counter-Notice as they will either agree to your terms or they will propose a counter offer. They may even dispute your right to purchase freehold of flat. In most cases the issue revolves around the premium (money) on offer to buy the freehold of a flat which is why it is so important your original offer was based on a RICS valuation.

The landlord can avoid selling the freehold if they can prove that they intend to demolish all or part of the building and redevelop it. They can only do this if at least two-thirds of all the building's leases are set to end within 5 years of the serving of the Initial Notice.

Buying Freehold of Flat Statutory Time Limits

The freeholder must serve their Section 21 Counter Notice on or before the date stated in the Section 13 Notice.
If the counter-notice rejects any of the terms of the initial notice, the leaseholders and freeholder have 2 months after the date stated in the Counter-Notice to negotiate the terms and premium.
After the first 2 months, the leaseholder has 4 months to make an application to the Tribunal to determine the terms/premium of the purchase of freehold.
The leaseholder and freeholder have 4 months after the date they both agreed to the terms to complete the purchase of freehold. If there is a delay, neither party can make an application to court for the first 2 months after terms are agreed ('Appropriate Period'), however should make an application for a court order in the 3rd month. You cannot make an application after 4 months.

The timelines are set our within the Act here - Leasehold Reform Housing and Urban Development Act 1993 Part I Applications to court or leasehold valuation tribunal Section 24 - Applications where terms in dispute or failure to enter contract

5

Buy the Freehold Conveyancing

The final stage in the process is to handle the transfer of the freehold title from the freeholder to the leaseholders. You will need specialist collective enfranchisement solicitors to handle this for you (which you should have in place at the point of serving the notice).

The end result will be that on the day of completion, your solicitor transfers the premium to acquire the freehold to the freeholder's solicitors and they confirm completion.

Post completion your solicitor handles registering the freehold in the name of the new freeholders; either as stated names, or as in the name of the company (with shares distributed according to number of leaseholders - so 50% if there are 2 leaseholders).

What is the cost of buying freehold from your landlord?

The costs of purchasing the freehold can be considerable and as you are sharing these with other leaseholders you should look to budget for the premium, solicitor and surveyor costs, plus the reasonable costs of the freeholder.

Read more - What are the costs of buying the freehold of your flat?

Frequently Asked Questions

HOWMANY

ABSENT

EASY

QUALIFYING

PARTICIPATION

NOMINEE

FORCE

Written by: Andrew Boast

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

Reviewed by: Caragh Bailey

Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.

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