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Buying a share of the freehold for your flat

Getting prepared

In this guide

If you qualify and decide to move forward, you'll then need to prepare for the process.

This involves:

  • organising a working group
  • setting up a cost fund
  • selecting and hiring a solicitor and valuer
  • choosing the nominee purchaser
  • creating a participation agreement

Organising a working group

Many leaseholders often form a working group to help:

  • focus on completing the necessary steps
  • meet deadlines that, if missed, could derail the purchase
  • find the required number of qualifying leaseholders

Setting up a cost fund

Even early on, collective enfranchisement involves expenses like:

  • legal advice
  • setting up a company
  • the valuation

To avoid confusion, delays and disputes, many leaseholders often set up a fund to cover these costs and agree with the others how it will work and who will pay in.

Selecting and hiring a solicitor and valuer

There are legal requirements for how the various steps in collective enfranchisement are followed. You also have legal rights and responsibilities related to your interactions with the freeholder.

It's strongly advised you hire a solicitor with experience of collective enfranchisement at an early stage.

A solicitor can:

  • help prepare information
  • set up a company that will formally hold the freehold
  • serve the initial notice to the freeholder
  • respond to the freeholder’s counter notice
  • convey ownership of the building from the freeholder to the company
  • change the terms of your leases after the purchase

You’ll also need a professional valuer to value the freehold. Find out more about what the valuer does.

Choosing the nominee purchaser

You should next decide the nominee purchaser, who will own the freehold and become the new landlord if collective enfranchisement is successful.

Setting up a company

In most cases the nominee purchaser will be a company owned by the participating leaseholders, which your solicitor can help set up.

Once the company owns the freehold, decisions about managing the building will be taken under the rules of company law.

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If you’re setting up a company, it must be incorporated with Companies House and nominated as the purchaser before you draft and serve the initial notice.

Owning the freehold jointly

The leaseholders can also buy the freehold jointly without setting up a company. This is usually only suitable for small buildings containing a few flats.

Up to 4 names can be registered as legal owners. If there are more than 4 leaseholders, the others can be registered as beneficiaries.

It’s best to enter into an agreement called a declaration of trust which will set out the relationship and obligations between the owners. This can help to avoid problems by setting out things like what happens when someone sells their flat, and how disputes should be resolved.

A solicitor can advise on this option.

Creating a participation agreement

You should draft a document called a participation agreement early in the process. This should be completed and formalised before you make your initial offer to the freeholder.

A solicitor can advise on the contents and wording.

Why use a participation agreement

A participation agreement is a contract between leaseholders participating in collective enfranchisement. It’s not legally required, but it’s essential to:

  • give the process structure and clarity
  • form a legal basis for your purchase of the freehold
  • ensure all participants are legally bound to pay their share (otherwise you could be personally liable for any shortfall).

The risks of not using one

If you do not have a participation agreement you might:

  • not have clear agreement on everyone’s financial contribution to the purchase
  • not have a shared understanding of procedures, which could lead to disagreements and costly errors
  • miss deadlines, which can delay or halt collective enfranchisement
  • not have legal clarity around the consequences of members not doing what they’ve agreed to
What should be in a participation agreement - Show Contents

Company and nominee purchaser

The agreement should state:

  • who the nominee purchaser is (usually a company formed for this purpose)
  • how leaseholders instruct the company
  • how the company ensures all leaseholders are aware of negotiations and correspondence with the freeholder
  • the company’s duties, including how it instructs solicitors and valuers, and how only it or its legal appointee communicates with paid advisors or the freeholder
  • how different kinds of decision are made – for example unanimously, by majority vote or by delegation to a smaller committee

Leaseholders

The agreement should state:

  • who the participating leaseholders are
  • leaseholders’ individual roles and responsibilities
  • what steps and decisions need to be taken and by when
  • agreement to meet deadlines
  • the consequences for leaseholders causing unnecessary delays
  • the consequences if any leaseholder withdraws from the process after committing
  • how much each leaseholder will pay towards the final cost of the freehold, including the cost of legal advice, valuation and any other professional fees

The initial notice

The agreement should include what members of the company have agreed in the initial notice, such as:

  • the price offered for the freehold
  • that the eventual price may exceed the offered price
  • the maximum price to pay, where they want to set one
  • that they have each approved the contents of the initial notice

Representations

Representations are statements of fact. For example, that the company members are qualifying tenants. Due care should be taken as to the accuracy of any representations being made, because the consequences of making an incorrect representation (or “misrepresentation”) can be severe.

Warranties

Warranties recognise that if certain agreed terms are breached by members there will be consequences, usually in the form of compensation.

For example, the agreement could set out what compensation must be paid if a participating leaseholder:

  • falsely claims to be a qualifying tenant
  • does not pay the agreed funds towards the purchase on time

Covenants

Covenants are promises to do or not do something so that the collective purchase can proceed.

For example, a leaseholder would be expected to:

  • pay on time towards the purchase price
  • pay relevant professional fees
  • on completion of the purchase pay any arrears of ground rent or service charges

Default indemnity

The agreement should include a clause that specifies:

  • the company is not liable for actions that are the responsibility of a member of the company
  • individual members have the right to claim compensation (indemnity) if the collective enfranchisement process fails or is withdrawn because of an action of the company

Miscellaneous

The agreement should also include, where relevant:

  • when the agreement is formalised
  • who the qualifying tenants are who are not party to the initial notice
  • a clause that allows more qualifying tenants to join the company before the initial notice is served (if members agree to this)
  • what professional advisers have been engaged
  • a statement that the contract with the freeholder will not be signed until all members have contributed the agreed amount of money
  • agreement among members that they should not engage the instructed solicitor or valuer for advice on their individual position (to prevent a possible conflict of interest)

If relevant to the purchase, the agreement should also set out how taxes including stamp duty land tax will be dealt with. You should get specialist legal or accounting advice about this.

Example participation agreement

You can refer to our example of a participation agreement.

Last updated:
20 December 2025
Next review:
20 December 2027