Timetable And Procedures When Buying The Freehold Of Your Block Of Flats
By: Leasehold Advice | Posted: 08th June 2011
Timing is vital in the event that you are buying the freehold of your apartment block so as to forestall substantial additional outlay. One of the most widespread causes for failing to acquire the freehold of a block of flats (when being permitted to do so) is overdue submission and reaction to notices and not adhering to the strict timetable. The timetable for a collective enfranchisement procedure under Section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 is thoroughly laid out and it is worth getting to grips with the timeline regardless of whether you are using a leasehold enfranchisement solicitor or not.
You do not have to make use of a solicitor for serving the various notices. However, the costs of making a mistake can be extremely significant. If you fail to notice deadlines you may be liable for the other party's abortive outlay. Plus in scores of instances lessees would need to put off for another year before one can serve another notice. Meanwhile, the price tag of acquiring the freehold might rise because the lease term will lessen by one year and one ingredient of the cost calculation is determined by this figure.
Virtually certainly you will be dealing with a well-paid solicitor acting on behalf of the freeholder. You are more likely to get rational and fair-minded responses to your notices and correspondence if you have a solicitor acting on your behalf instead of acting in person. It is also prudent to use a specialist, something like a vetted member of the Association of Leasehold Enfranchisement Practitioners, as this is a dynamic area of legislation fraught with complexities that a local family attorney can easily overlook.
In addition, you ought to have the block of flats professionally valued. This does not mean the retail value of the flat, but a computation of the compensation the freeholder is entitled to receive if lessees buy the freehold or extend your lease. Resist the urge to speculate what each value is after seeing an estate agent and then adding every one of the properties! If flat owners submit an amount that is not considered reasonable - and that means precisely based on agreed fundamentals as laid down in legislation and prior practice - then your notice may well be deemed invalid. Specialist enfranchisement valuers should be used for this purpose.
If you are undertaking a Section 13 procedure you should, at the outset, be certain that you have spoken to as many of your neighbours as practicable. At the very least you would need half of all the owners in the estate to consent to sign the initial notice. Nonetheless, there is no legal obligation to consult every neighbour in the event that you are planning to get the freehold.
It is likely to take flat owners time to gather the backing and you should set aside several months for this process. A participation agreement and gaining significantly more than 50% participation will help bring down the chance that the process is derailed when you are well progressed by individuals dropping out when moving, dying or lack of funds.
1. Information notice
It may be recommended to serve a discretionary Information Notice to make sure lessees possess the accurate data about the freeholder, uncover any intermediate leases and get sight of all appropriate documents. Section 11 of the 1993 Leasehold Reform and Urban Development Act allows a right for flat owners to serve notices on a collection of entities with interests in their flats. At this juncture, the clock has not started ticking and it provides a possibility for leaseholders to get all their paperwork in order in plenty of time.
2. Valuation
It is important that your notice and offer price for the acquisition of the freehold is built on accepted fundamentals of valuation. If not, you may possibly throw away a large amount of time and money, particularly in the event that the freeholder decides to dispute your notice. It is likely to simply take a few weeks for an expert enfranchisement surveyor, or valuer (the two terms are interchangeable), to present the required figures, ready for the solicitor to draw up the Section 13 notice.
3. Nominee purchaser
This might be an individual however is by and large a limited company, in particular for blocks with more than 3 flat owners. There is provision in the 2002 Commonhold and Leasehold Reform Act that a specific vehicle - a Right To Enfranchise (RTE) company - be used. However this clause has not yet commenced and is now not expected to. There must be a clearly defined body or group of people who propose to get their freehold.
4. Serve the initial notice
The valuation date will at this point be set and delays will not result in increased costs in particular following on from your lease shortening every day. The freeholder (referred to as the landlord) has 21 days to call for more information from the flat owners (referred to as lessees, leaseholders or tenants). The nominee purchaser has twenty one days to respond to any such request.
5. Counter Notice
The freeholder must serve a Counter Notice by a date specified by you. This date must be a minimum of 2 months from the date that the Initial Notice was served. If the freeholder does not do this then the burden is on the nominee purchaser (the vehicle applying to purchase the freehold) to then apply to their County Court for a Vesting Order. Otherwise the flat owners' notice is deemed to have been withdrawn.
The freeholder may possibly respond in the Counter Notice alleging that the apartment owners do not meet the criteria to submit a Section 13 notice. If the notice has not been properly drawn up then skilled solicitors might expose such faults at this point.
6. Response to Counter Notice
The lessees will by and large put forward an initial notice with a suggested purchase figure lower than that which an independent valuer may suggest. It is not a suprise that the freeholder's counter notice will frequently advocate a higher figure. Next the negotiation starts. There is no rigid or restricted time for this negotiation and flat owners ought to be wary of freeholders that draw out the negotiation. However, by and large the parties reach a decision on a value and a sale contract may be drawn up.
7. Invalid Counter Notices
In the event of the Counter Notice claiming invalidity, the nominee purchaser ought to apply to the courts declaring they think the notice is indeed valid. This has to be done within 2 months of the date of the Counter Notice.
8. Leasehold Valuation Tribunal
At this point the parties are in dispute. They can endeavor to negotiate and resolve issues. But, if a impasse persists, the leaseholders have a 4-month opportunity to make a claim to a body known as the Leasehold Valuation Tribunal to make a decision. This request can't be made before 2 months have elapsed after the Counter Notice date, but can't be for a longer time than 6 months later than this date.
Now the clock stops for the time being. There can be a wide choice in the intervals of time it takes for the LVT to set a tribunal date. The difference is regional since the LVTs are split into geographic regions and history suggests that the interval can range from between three months and 1 year.
The LVT will send out its conclusion and this becomes final and incontrovertible 21 days after it is sent by them. For the duration of these 21 days leaseholders may still dispute the LVT ruling however this goes to a superior court, the Lands Tribunal, if the LVT agrees. At this point expenses shoot up enormously. While lessees can conceivably stay away from legal representation even at the LVT, it is near unavoidable in higher courts.
Draft Contract If there is no escalation to the Lands Tribunal for the period of those three weeks, subsequently the freeholder should provide a draft contract inside this period. And inside two months of the day of the LVT adjudication, both the freeholder and the lessees are expected to have signed the agreement.
The law insists on this transparent timetable, though it is viable to come to a deal 'outside the act' and to negotiate informally. This is hardly ever a favored course of action when looking to purchase the freehold because there is no compulsion for the freeholder to play ball. In most instances, freeholders do not wish to put up for sale the freehold unless they have got to and this is why a Section 13 process might time and again be a better choice in compelling the freeholder to play ball. Alternatively, a co-operative landlord my accellerate the process and this is where expert understanding and first-rate advice become invaluable.
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Andrew Szebeni is part of the management team of the Association of Leasehold Enfranchisement Practitioners. Members include solicitors, surveyors, intermediaries, managing agents in England and Wales specialising in the field of leasehold enfranchisement. Find out more about buying the freehold of your block of flats at our web site www.alep.org.uk.This article is free for republishing
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Tags: instances, correspondence, timeline, price tag, outlay, retail value, solicitor, housing and urban development, complexities, local family, lease term, freeholder