If you are the leaseholder of a flat or house you may have individual and collective rights relating to your property. These rights are based on the concept of “enfranchising” the leaseholder so they have greater rights against their landlord.
A leaseholder can, subject to qualification criteria of the property and the status of the leaseholder, force the landlord to grant a new lease or to force the sale of the freehold to the leaseholder.
There are various regimes under which a tenant may have a right to buy the freehold or to extend a lease.
Leasehold Reform Act 1967 (LRA 1967)
A qualifying tenant of a house may be able to buy the freehold or take a new lease for an additional 50 years.
A “house” is defined in section 2(1) of the LRA 1967. A house does not have to be structurally detached. It can be divided vertically from an adjoining house. It can be divided into flats, and if so, an individual flat is not a house, but the building as a whole may be.
The tenant of a lease of a house has the right:
- To buy the freehold (and any intermediate leasehold interests) or
- To a lease extension for a term expiring 50 years after the term date of the existing lease.
Certain leases are excluded from the right to buy or to a lease extension, and for the right to buy or to a lease extension to arise a number of conditions must be satisfied.
Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993)
A qualifying tenant of a flat may have a collective right with other tenants to buy the freehold or be able to extend the lease of the flat.
Right to collective enfranchisement is a collective right for tenants of flats who hold long leases to buy the freehold of (and any intermediate leasehold interests in) their building, together with certain additional property.
The right to collective enfranchisement is available where certain conditions are satisfied. These conditions relate to the nature of the premises, the number of qualifying tenants and the proportion of those qualifying tenants that participate in the claim. Certain premises are excluded from the right to collective enfranchisement.
The right to a lease extension, (actually the grant of a new lease of the flat) is an individual (rather than a collective) right.
The right may be exercised where certain qualifying criteria are satisfied. A new lease under the LRHUDA 1993 must be granted for a term equal to the unexpired residue of the existing lease plus 90 years; for a premium; at a peppercorn (nil) rent; and otherwise on the same terms as the existing lease (subject to certain exceptions).
Under section 153, there is a right in respect of certain long leases to “enlarge the term of the lease into a fee simple”.
Landlord and Tenant Act 1987 (LTA 1987)
Under section 1, a landlord cannot dispose of its interest in a building that consists of at least two flats held by qualifying tenants without first offering it to certain residential tenants.
The LTA 1987 will apply to premises that consist of the whole or part of a building; and contain two or more flats held by “qualifying tenants”; the number of flats held by “qualifying tenants” exceeds 50% of the total number of flats contained in the premises.
A house that has been converted into flats could benefit from both the right of first refusal under the LTA 1987 and the LRA 1967 rights to enfranchise or take a lease extension.
This gives secure tenants the right to buy, at a discount, the freehold or long leasehold interest in their homes if they fulfil certain conditions.
We would always recommend seeking full legal advice if you are considering a lease extension or the acquisition of the freehold.
Andrew Miranda is a partner at Ellisons Solicitors