It is important to understand that purchasing the freehold in the context of a block of flats is a collective action rather than an individual right.
There are two main ways in which leaseholders can buy their freeholds, either in response to a notice served by the freeholder to sell the freehold in accordance with the Landlord and Tenant Act 1987, or by serving a notice on the freeholder to buy the freehold under the Leasehold Reform Housing and Urban Development Act 1993.
Purchasing the freehold to your property by either means will require co-operation between the leaseholders and the assistance of professional legal and valuation advice.
In this Q&A, Clare Groom, Senior Associate Solicitor in Bishop & Sewell’s award-winning Landlord & Tenant Team, outlines some of key considerations and steps in purchasing your freehold.
I have received a Section 5A Notice from my freeholder, what does it mean and what do I do?
If you have received a Section 5A Notice Offer Notice, your freeholder is offering to sell the freehold to the leaseholders in the block.
A Section 5A Offer Notice sets out a fixed price at which the freeholder is prepared to sell the freehold and sets out the key terms of the property sale. The offer remains open for acceptance by the leaseholders for a period of two months from the date on which it is made.
In order to accept the offer, more than 50% of the leaseholders in your building will need to agree to proceed, and serve an acceptance notice under Section 6 of the 1987 Act during the offer’s open period.
There is a further period of two months in which the leaseholders will need to serve a notice nominating a purchaser, which is normally a limited company specifically incorporated for the purpose of purchasing and holding the freehold.
Exchange and completion then follow a statutory timetable.
If the offer is not accepted or the statutory time limits are missed, the right to purchase the freehold will be lost and the freeholder is free to sell the freehold to a third party at a price no lower than that offered to the leaseholders, for a period of 12 months.
There are alternative notices which a freeholder may serve under the Landlord and Tenant Act in order for the sale of the freehold, such as Section 5B notices, whereby the freeholder intends to dispose of the property by sale at auction . With any notice that has been served you should obtain legal advice.
Unhappy with your freeholder? Consider whether you can exercise your statutory right to buy the freehold.
If certain qualifying conditions are met, the leaseholders of a block of flats can compel their freeholder to sell the freehold to the building in accordance with the provisions of the Leasehold Reform Housing and Urban Development Act 1993.
You will need to obtain advice to ensure the leaseholders and the building meet the qualifying criteria to initiate what is known as the ‘collective enfranchisement’ process.
At least half of the leaseholders in your building must participate in the freehold purchase and it is recommended that you obtain independent valuation advice prior to service of the initial notice to ensure the participating leaseholders have a realistic view of the likely costs of purchasing the freehold.
An initial notice, known as a Section 13 Notice, will be served on your freeholder making an offer to purchase the freehold; the freeholder will then respond with a Counter Notice within two months with a price for which they would be willing to sell the freehold.
There is then a period of six months to conduct negotiations with a view to agreeing the price and the terms of the transfer of the property.
In the event that that parties cannot agree on price or transfer terms, the leaseholders may refer the matter to the First-tier Tribunal (Property Chamber) for a final determination of the price to be paid, or to determine any other terms of the sale that are still in dispute.
As well as paying your own legal and surveyors fees, leaseholders are liable for some of the freeholder’s costs in the process too.
Having purchased the freehold by either method, the leaseholders retain their existing leaseholds and the company incorporated by the participating leaseholders acts as freeholder. However, the freehold company can then grant each participant a 999-year lease to maximise the value of each participant’s flat.
Bishop & Sewell are experts in freehold purchase matters. We can help with all aspects of the process from responding to a Section 5 Notice which has been served by the freeholder, to initiating an enfranchisement claim.
If you are looking for assistance or advice on the issues raised in this article, please contact Clare Groom directly or email [email protected] or call 020 7631 4141.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
The above is accurate as at 20 July 2023. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
