This is something of a dark art, and rather a specialist discipline.
Because of our extensive flat service charge management work, we have acquired a good deal of experience in negotiating enfranchisement and lease extensions. Indeed, this work is frequently referred to us by other surveyors.
Generally, our view is that leasehold flat schemes work best when the freehold is owned or controlled by the leaseholders (NB this is not the same as freehold flats, which have separate problems).
There are two major thresholds in valuing both enfranchisements and lease extensions. With 80 years or more of the lease unexpired, the freeholder is not entitled to any marriage value and this makes the acquisition by the leaseholders considerably cheaper.
At about 65 or 66 years unexpired, marriage value is payable and the freehold reversion becomes of increasing and discernible value. Therefore, the message is, the sooner the better.
PURCHASING THE FREEHOLD
In simple terms, if 50% or more leaseholders in a block of flats agree and combine, they are entitled to acquire the freehold interest whether the freeholder wants to sell it or not. It is of course subject to the price, either being agreed, or being calculated in accordance with the statutory formula, if necessary by reference to the Leasehold Valuation Tribunal.
We are convinced of the benefits for most leaseholders as there is far greater control, better estate management and potential savings on service charges, insurance premiums etc.
The boot is on the other foot with the freeholder but as the 50% majority of the leaseholders have the statutory right to buy, freeholders need to be properly advised of the true value of their asset so that at least they obtain a fair price.
INDIVIDUAL EXTENSION OF LEASES
Often, the 50% "qualifying majority" needed to buy the freehold cannot be assembled and in these cases most leaseholders will have the right to an individual lease extension of a further 90 years, and the ground rent will effectively be cancelled. Once again, the freeholder is entitled to compensation. Equally, the calculations and the negotiations are broadly similar on behalf of both the leaseholder and the freeholder.
In practice, the majority of these matters are settled by negotiation, although there can sometimes be brinkmanship on either side.
As well as our own expertise and experience, we have access to specialist solicitors who are equally conversant with this rather arcane but increasingly encountered discipline. Although the majority of cases settle by negotiation, they are usually accompanied by specific notices and responses and, just like the calculations, they have to be done by the letter of the law.
HOW TO PROCEED We are happy to give initial advice, either to individuals or indeed to groups of leaseholders (often at AGMs) with the initial contact free of charge.
The rule of thumb is that it's never too early to start these proceedings.
Points of contact are:
· William Marshall, MSc, MRICS, MNAEA - tel: 0113 2054197, e-mail: William@adairpaxton.co.uk
· Bruce Collinson, FRICS - tel: 0113 2395773, e-mail: bruce@adairpaxton.co.uk
