Freehold Acquisition Orders: an underutilised tool?

An Acquisition Order may be applied for by any of the qualifying leaseholders in the building and generally there are two avenues open to them:

1. Apply to the High Court or County Court for an Acquisition Order to acquire the freehold landlord’s interest - pursuant to Section 25 (Part 3) of the Landlord and Tenant Act 1987 (the 1987 Act); or

2. An application may be based on a Manager/Receiver having been appointed by the FTT for no less than two years on the date of application to the court - pursuant to Section 24 (Part 2) of the 1987 Act.

Before the courts will grant an Acquisition Order they may first be satisfied that certain conditions have been fulfilled, namely that there are two or more flats in the building; and two thirds of the flats are owned by qualifying tenants; and the requisite majority of qualifying tenants make the application.

This right to apply for an Acquisition Order does not however apply where any leaseholder owns more than two flats in the development; or if less than half the flats in the block are let on long leases (not business leases) and the landlord is resident.

The grounds for making an application under Part 3 are specific and are set out in Section 29 of the 1987 Act. Among other things the court must be satisfied that:

1. The application is made in respect of qualifying premises;

2. The landlord either is in breach of any obligation owed by him under their leases or would be in breach but for the fact that it has not been reasonably practicable for the tenant to give him the appropriate notice;

3. The court considers it appropriate to make the order in the circumstances of the case;

4. Where a building has been subject to the appointment of a manager pursuant to this section and the manager having been appointed for no less than two years on the date of the application to the court.

Before an application can be made to the court, a Preliminary Notice must be served on the landlord unless the court agrees to dispense with the notice requirement.

If the court makes the order, the FTT will determine the terms on which the landlord’s interest may be acquired (including the purchase price) unless they have been agreed between the parties involved. Obtaining the freehold via Part 3 of the 1987 Act is often under used (or unknown) but with careful planning and preparation it can be a valuable tool for tenants who are tearing their hair out with rogue landlords.