10 Federation of Private Residents’ Associations Newsletter ASK THE FPRA SPECIAL BUYING THE FREEHOLD... HELP!
One of our members contacts FPRA: “We have unexpectedly been offered the Freehold. Valuation being arranged. What next? Have you any booklets on enfranchisement or right-to- manage, please? Much advice is needed.”
When replying, the FPRA adviser ran through the process, which although specific to this member, is of interest to all.
The Right to Collective Enfranchisement THE RIGHT The primary right granted by Part I of the Leasehold Reform Housing and Urban Development Act 1993 is that of collective enfranchisement, which is dealt with in Chapter 1. Section 1 of the 1993 Act confers on qualifying tenants of flats contained in premises to which Chapter 1 applies, the right to have the freehold of those premises acquired on their behalf by a person or company (or persons or companies) appointed by them for that purpose, at a price determined in accordance with the Act.
PROPERTY INCLUDED IN THE CLAIM
The basic right is to acquire the freehold of the premises in which the qualifying tenants’ flats are contained, which in essence comprises the whole of the building containing the flats (referred to as “the relevant premises”).
In addition, however, the qualifying tenants exercising the right are entitled to acquire the freehold of other property, which satisfies either of the following two conditions:
1. Appurtenant property which is demised by the lease held by a qualifying tenant of a flat contained in the relevant premises. “Appurtenant property” is defined as meaning any garage, outhouse, garden, yard or appurtenances belonging to or usually enjoyed with the flat.
2. Property which a qualifying tenant is entitled under the terms of his lease to use in common with the occupiers of other premises. There is no limitation on what
that property might comprise. It could include a sports hall, a gymnasium, a swimming pool, gardens or roads and footpaths, for example. Any property that is so acquired will of course be subject to the rights that are currently granted over it in favour of other tenants, whether or not those tenants own flats comprised in the building that is the subject of the collective enfranchisement claim.
You could in theory (subject to the qualifiers below) acquire a great deal of property under this heading, but it is hard to see what the benefit would be of doing so.
The right to acquire the freehold of the above type of property could cause practical difficulties to the freeholder, so the Act permits the freeholder two alternatives to transferring the freehold of this other property. Firstly, the freeholder may grant over the additional property such permanent rights as will ensure that thereafter the occupier of the flat or flats in question has or have, as nearly as may be, the same rights as those enjoyed prior to the collective enfranchisement claim.
Secondly, the freeholder can choose to convey the freehold of other equivalent land or property, over which such rights may be granted.
I expect that this is unlikely to be relevant to your claim.
Upon exercising the right to collective enfranchisement, the qualifying tenants are required to acquire certain leasehold interests and entitled to acquire others. Those leasehold interests are acquired in the same way, by the nominee purchaser.
The obligation is to acquire any lease which is superior to the lease held by a qualifying tenant (e.g. a head lease).
If a condition is satisfied, the qualifying tenants are also entitled to acquire any lease of common parts or communal areas. The condition is that the acquisition of the interest in question must be reasonably necessary for the proper management or maintenance of those common parts or communal areas, as the case may be.
Further, the landlord is entitled to certain mandatory or discretionary leasebacks, of any “units” which are not let to qualifying tenants. The leasebacks in this case will be
mandatory, as the units that are not let to qualifying tenants are let to secure tenants. The term of each leaseback will be 999 years, the rent will be peppercorn, and the other terms will be broadly similar to your existing long leases.
Eligibility PREMISES QUALIFYING In order for premises to qualify for collective enfranchisement, three conditions must be satisfied:
1. The premises must consist of a self- contained building or part of a building.
The word “building” is not defined, but denotes some kind of permanent erection. It is considered that the definition of this word would not normally cause any problems in view of the fact that the building must contain at least two flats.
A building is “self-contained building” if it is structurally detached. This is a mandatory requirement of the Act. If it is not structurally detached, it is not self-contained, even if it could be so described in common practice (although it may be a self-contained part of a building – see below).
The Act refers to “a” building. It has been held in the County Court (correctly, it is considered) that “building” should not be construed as meaning “building or buildings”. This is to be contrasted with the exercise of the right of first refusal under the Landlord and Tenant Act 1987, in which it has been held (in a highly contentious decision: Long Acre Securities v Karet) that the word “building” can include more than one building, where those buildings share common amenities, under one service charge scheme. It follows that in your case each individual “block” would have to the subject of a separate collective enfranchisement claim.
A claim can also be made in respect of “part of a building”. A building is a self- contained part of a building if it satisfies two conditions:
a) It must constitute a vertical division of the building and the structure of the building must be such that that part could be redeveloped independently of the other parts. There must be a clear vertical division, subject only to de minimis variation. This is to be
Issue No. 107 Winter 2013
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