Since 1967, tenants of houses under long leases have had the right either to acquire the freehold or to extend the lease by 50 years.
The right to an extension is seldom used - as such the FAQs below concentrate on the right to acquire the freehold.
The main ones are as follows (although there are a number of exemptions and special situations which are mentioned below):
It is no longer necessary for the person exercising the right to have lived in the property. There is no residency qualification, only one of ownership.
It is sometimes difficult to ascertain whether the building is a house as some large buildings may have a commercial element to them. The building must be self-contained and be divided vertically from any adjoining property. There is no right to enfranchise if a material part of other premises runs either under or over your house or if your house similarly juts over or under adjoining property.
The main ones are as follows:
The valuation formulae are complex but are primarily based on ground rents and yields and the length of the unexpired term. If your lease has less than 80 years left at the date you serve your claim, you may (unless your lease is one that falls under what is known as the "original" basis of valuation) also pay a "marriage value" which can considerably increase the price.
In addition, you will have to pay the landlord's reasonable professional costs which will normally be solicitors’ and surveyor's fees. These include those relating to considering and assessing your notice and generally dealing with the statutory process and the valuation aspect and also the conveyancing of the freehold. Finally, the landlord will ask you for a statutory deposit which is three times the annual rent payable when the notice of claim is issued. This could be substantial if the annual rent is anything other than a nominal "ground rent".
You will also have your own professional costs which will be those of your solicitor and surveyors and possibly those of a barrister, particularly if the matter has to be referred to the First Tier Tribunal (FTT). The usual conveyancing charges such as Stamp Duty Land Tax (depending on the price you pay), Land Registry fees and other incidental disbursements such as search fees will also need to be budgeted for.
We would always recommend this. You must have a good idea at the start of this process of what your costs will be and whether you can afford it. Unlike claims which can be brought for a lease extension or collective enfranchisement (link to other FAQs), the initial notice for a claim for a house creates a binding contract. If you fail to proceed, you can lose your deposit, although you do have the right to withdraw within one month from when the price is ascertained or agreed.
The Act specifies which rights and other covenants contained in your lease will still apply to the freehold once it has been acquired. This can be crucial as it may curtail your future plans to redevelop the property.
Where there is a dispute as to entitlement then the matter has to be referred to a county court. If the price or terms of the freehold transfer cannot be agreed, then the matter must be referred to the FTT for determination. This can be a lengthy and expensive process. As for costs in the county court, as a general rule the losing party is responsible for the winning party's costs. For matters which are determined by the FTT, the parties will generally be responsible for their own costs.
Once all the terms in dispute have been resolved either by agreement or by the FTT/county court then the transfer of the freehold can be executed and monies paid over. Pre-completion conveyancing searches at the Land Registry are carried out and, once completion takes place, the transfer will be sent to the Land Registry for registration. At this point any Stamp Duty Land Tax will be paid.
The Land Registry will then complete registration (normally within 55 business days) and, as part of that application, your existing lease will be cancelled.