Leasehold enfranchisement

Most people who own a flat have the benefit of rights under Leasehold Reform Housing and Urban Development Act 1993 as amended.
They can:

  • get an extra 90 years on their lease and eliminate all ground rent (a statutory “lease extension”); or
  • band together with a majority of other flat owners in the block to get the freehold (“collective enfranchisement”).

There are all sorts of exceptions and rules about qualifying, but most flats and most flat owners qualify. The landlord can be compelled to act accordingly.

Now, the flat owner can’t have these things for nothing. When someone asks “Do you own your flat?” no doubt, the answer is, “Yes, I do”. In fact, the technical position is that the flat owner has an interest in the flat: the right to live there, let it and sell it for as long as the lease lasts. The landlord also has an interest: the right to draw a rent from it and the right to have it back on expiry of the lease (called the ‘reversion’). This interest has a value, and it would not be right to take that value away without paying an appropriate price for it. It’s a small value if no rent is payable and the reversion is distant. It’s a high value if a high ground rent is payable and the reversion is fairly close at hand.

After the flat owner has done one of the two things mentioned above, the chances are that the flat will be worth slightly more than both parties’ interests before the transaction takes place: the whole is worth more than the sum of the parts. This extra value – known as marriage value – is distributed on a 50-50 basis to flat owner and landlord, and has therefore to be assessed.  (If the lease of the flat still has over 80 years unexpired, then marriage value is disregarded). In the case of collective enfranchisement, any items of value which are not participants’ flats also have to be paid for.

We specialise in this type of valuation – valuation under the Act. We work for either landlords (whether freeholders or intermediate landlords) or tenants: the principles are the same for both. What we have to do is work out the value of the landlord’s interest, the marriage value and (in the case of collective enfranchisement) the value of the other items in the block. We also advise generally, with the help of solicitors and barristers. In the case of collective enfranchisement, we advise on tactics and strategy.

Although leasehold enfranchisement transactions are rarer in houses than in flats (houses being covered by Leasehold Reform Act 1967 as amended), we are experienced in dealing with those as well.