Reasons to enfranchise

Taking control – although the leaseholders often own the majority of the equity in the building (in the value of their flats), the freeholder controls all aspects of its management, maintenance and future. Buying out this minority share places the leaseholders in full management control, to save costs, improve services and manage the building as they choose.

Renewing the leases – in acquiring the freehold the leaseholders gain the power to extend the term of their leases, ideally to 999 years. The valuation principles of lease extension and freehold purchase are very similar and, if most leaseholders in a building agree on the need to extend their leases, a joint acquisition of the freehold can often provide better value than individual actions to extend.

Exploiting assets – ownership of the parts of the building or land reserved to the freeholder may provide valuable opportunities, a telecoms aerial on the roof or construction of an additional storey to provide flats to sell, development of unused land or commercial use of unused parking. These can provide substantial sums, either as one-off windfalls to offset costs of acquisition or as future income.

The converse also applies of course, acquisition in order to prevent the present freeholder’s exploitation of the assets. There have been many cases where leaseholders have bought their freeholds simply to prevent their landlord building on the roof or otherwise developing the building.

Winding up head leases – an intermediate lease between the freeholder and the individual flat owners can cause both problems and expense, sometimes imposing unwelcome management arrangements. Acquisition under the 1993 Act delivers an unencumbered freehold, winding up any head lease or intervening leases.

Increasing values – Savills’ and other research seems to confirm that ownership and control of the freehold by the leaseholders places a premium on the values of the flats; purchasers and prepared to pay a little more for the prospect of a well-managed block where they can have their say.