Collective Enfranchisement (Buy Your Freehold)

Collective Enfranchisement Valuation

Collective enfranchisement gives leaseholders the right to join together and purchase the freehold of their building and is often considered an alternative to lease extension. In exchange for a premium, homeowners can benefit from having greater control over the management and maintenance of their property, and add to their home’s value by eliminating the expense of lease extensions for future owners.

The premium compensates the landlord for their loss of income from future ground rent, their inability to resume possession of the flats and their portion (50%) of the increase in property value due to the enfranchisement. The exact sum will differ between properties and should be calculated and negotiated with the expertise of a Chartered Surveyor.

At Foundation Chartered Surveyors, we have helped numerous clients across London with collective enfranchisement, and have represented both freeholders and leaseholders in their negotiations over premiums. For more information about the benefits of enfranchisement, and to understand the eligibility criteria for an enfranchisement application, please see our dedicated Collective Enfranchisement Guide.

 

 

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Calculating a Collective Enfranchisement Premium

Once you have established that you have enough eligible tenants to proceed with a collective enfranchisement, an essential step is determining how much each leaseholder will need to pay.

 

Desktop Valuations

Our team at Foundation Chartered Surveyors can provide a thorough report without needing to physically attend your property. All we require is a sample copy of a lease, then using proprietary property databases, we can conduct a desktop valuation, which ensures you receive the key valuation data required for your collective enfranchisement.

These figures include the likely settlement premium, the offer or counter-offer we anticipate your freeholder will make, and the figure we recommend to accompany an opening offer in either formal or informal negotiations. It will also provide a flat-by-flat breakdown, specifying the amount payable by each participating leaseholder.

We would recommend this level of service if you are looking for a detailed analysis without having the inconvenience and expense of a full inspection. It typically suits properties that are valued up to £500,000, or if the unexpired lease terms exceed 80 years and local transactional evidence exists in support of the valuation. For properties with a higher value, or properties located in prime Central London or those with a shorter lease, a full inspection valuation is usually more appropriate.

 

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Full Inspection Valuations

Where a full inspection of the property is deemed appropriate, we will produce a comprehensive report based on our findings, including the same three valuations available with the desktop valuation (the anticipated settlement premium, the offer/counter-offer we expect from your freeholder and our suggested opening offer for formal or informal negotiations).

To calculate how much each participating leaseholder should pay, we will conduct an inspection of each flat to take measurements and determine the current market value in its unimproved state. This allows us to include the Gross Internal Area and any unusual property features which should be considered a part of the valuation. This allows our valuation to be sensitive to unusual features of the property, particularly if it is of higher value, or situated in the Prime Central London location.

For more information about collective enfranchisement, or to arrange a free consultation in regards to a desktop or full inspection valuation, please contact us today.

 

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Collective Enfranchisement FAQs

What are the eligibility criteria for collective enfranchisement?

To be eligible for a formal leasehold enfranchisement, the building must contain at least two flats, and at least two-thirds of those flats must be owned by qualifying tenants. For example, these tenants must be in possession of a lease that was originally granted for more than 21 years. If you would like more information about whether your building is eligible, please check our Collective Enfranchisement Guide or call our team directly on 020 8133 9517.

Do all leaseholders have to take part in the collective enfranchisement?

No, not all homeowners within a freehold building need to be involved. The landlord cannot refuse a request for collective enfranchisement as long as at least 50% of the flats are prepared to take part (providing they are eligible under the 1993 Act to do so).

What is ‘marriage value’?

If a homeowner purchases the freehold for their property or extends their lease, it results in an increase in their property’s value. According to the legislation, this increase in value needs to be split equally between the homeowner and the landlord – the landlord’s 50% is known as ‘marriage value’.