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Leasehold Houses – Buying the freehold – Qualification and procedure

For buying the freehold of leasehold houses.

Qualification requirements for a tenant to buy the freehold of their leasehold house and outline of the procedure.

Answers to specific problems are available in the Frequently Asked Questions on Houses.

Application Form – Leasehold Enfranchisement: Price Payable – Houses and Premises

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Introduction

This leaflet is not meant to describe or give a full interpretation of the law, as only the courts can do that. And it does not cover every case. If you are in any doubt about your rights and responsibilities, you should get advice from a solicitor who specialises in this area of the law.

This guide outlines the requirements for you to qualify to buy the freehold of your leasehold house. It also gives an outline of the procedure for doing this. It does not deal with agreeing the price to buy the freehold. Please see our advice guide on Valuation for buying the freehold of a leasehold house for this.

Although the terms ‘landlord’ and ‘tenant’ are used in the wording of the law, these refer to freeholder and leaseholder.

The law

The Leasehold Reform Act 1967 (the 1967 act) gives leasehold tenants of houses the right to buy the freehold. The right to buy the freehold (and any intermediate leasehold interest, for example the head lease) without the landlord’s agreement is called ‘enfranchisement’. Some landlords will sell the freehold without you needing to make a formal claim, but whether you have to make a claim or not, you should get professional advice to find out roughly what the whole process will cost.

The 1967 act has been amended and extended over the years, which has made the rules for calculating the price complicated. The latest amendments are set out in the Commonhold and Leasehold Reform Act 2002, which simplified the rules for qualifying for enfranchisement and gave leaseholders extra rights.

Qualifying for enfranchisement

The right to enfranchise depends on the house, the lease and you meeting certain conditions, which are set out below.

The house

The house must be a building which is reasonably considered a house, divided vertically from any adjoining house. It does not matter if the building has been divided into flats as long as you have the lease of the whole house.

Certain buildings which contain business premises can qualify as a house within this definition. For example, the lease of a building which is a shop with a flat above may qualify for enfranchisement.

The lease

It must be a long lease, originally for a term of more than 21 years or with a right to renew.

The leaseholder

You must be the leaseholder of the house at the time you apply for enfranchisement, and must have held the lease for the past two years. (Also, if you have the right to buy the freehold, if you die your personal representatives can serve a notice to buy it within two years of the grant of probate or letters of administration.)

What is included in the sale?

The right is to buy the freehold of ‘the house and premises’.

The definition of ‘premises’ under the act includes any garage, outhouse, garden, yard and any items let to the leaseholder with the house. The premises must be let with the house, but this could be under an extra lease or deed.

The landlord can ask for the premises to be included in the sale if keeping them would cause the landlord hardship or inconvenience. Or, they can ask to keep certain premises if they have an interest in these and might suffer hardship or inconvenience as a result of selling them.

The procedure

The procedure for buying the freehold is set out in the 1967 act and in the Enfranchisement Regulations (the regulations). The procedure for houses does not follow the same clear timelines as when enfranchising flats or extending your lease.

The tenant’s notice

You start the process by serving a tenant’s notice on your landlord. Your landlord (or ‘reversioner’) is the person who has a tenancy of 30 years or more than you. This will usually be the freeholder. If there are any other landlords besides the freeholder, you should also serve a notice on them.

The notice should be in the form set out in the regulations (the prescribed form), or should include the same information. If in doubt, it is best to use the prescribed form.

You do not have to include a proposed price in the notice. Serving the notice creates a contract between both sides to grant and accept the freehold. The contract is on the conditions of sale set out in the regulations. The price must be agreed using the formula in the legislation, see below.

You (and any joint leaseholders) should sign the notice. Case law has suggested that you can authorise an agent to sign the notice. You can serve the notice in person or post it to the landlord’s last known address in England and Wales.

The landlord`s response

If the landlord wants to serve a ‘notice in reply’, they should do this within two months of the date of the tenant’s notice. If the landlord does not serve a notice in reply, this does not prevent them from negotiating over the valuation or challenging whether the tenant`s notice is valid, although there could be cost consequences if the matter goes to court. Also, if the landlord does not serve a notice in reply, they cannot later challenge the extent of the premises they want to be included in, or excluded from, the claim.

If the landlord serves a notice in reply, the notice should state whether the landlord admits your claim to buy the freehold and, if not, why not.

The landlord can ask for a deposit of three times the yearly rent of the property.

Procedure following the date allowed for the landlord`s reply

If the landlord admits your claim in the notice in reply, the procedure to follow is governed by the regulations, which set out the conditions of sale. These apply as well as the negotiations to agree the price.

Under the regulations, the sale should complete at least four weeks after the price is agreed.

If you and the landlord cannot agree a price, you should apply to the First-tier Tribunal (Property Chamber), or the Leasehold Valuation Tribunal in Wales, for a decision on the price. The tribunal may also deal with any disputes relating to the sale (for example, the extent of the house or premises or the rights or conditions to be included in the sale).

If the landlord does not admit your claim (either in the notice in reply or by not serving a notice in reply), you will have to apply to the county court to buy the freehold.

Completing the sale

As explained above, the sale can complete four weeks after the price is agreed. However, either you or the landlord can choose the actual completion date by giving the other a notice specifying the first working day four weeks after giving the notice.

If either you or the landlord fails to meet the responsibilities arising from the tenant’s notice or conditions of sale set out in the regulations, the other can serve a two-month ‘default’ notice. This notice should refer to condition 10 of the conditions of sale, explain which responsibility has not been met, and ask for this to be put right before the end of the notice.

If you do not meet the requests of the default notice, the contract will end and the landlord can keep the deposit. If the landlord fails to meet the requests of the notice, the contract will end, you do not have to pay the landlord’s costs, and the landlord will return the deposit.

In most cases, you will want the contract to be completed so are unlikely to serve a default notice. If the landlord is not meeting their responsibilities, you are more likely to use other solutions, such as applying for a court order to force the landlord to complete the sale.

LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.

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