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Leasehold Reform Act 1967: Right to Buy the Freehold Interest of Your House

There are plenty of us who own the leasehold interest in our homes. Being...

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Leasehold Reform Act 1967: Right to Buy the Freehold Interest of Your House

4th May 2020

News : Litigation

There are plenty of us who own the leasehold interest in our homes. Being a “leaseholder” or “tenant” means that you do not own the land that the property is built on but rather you have the right to live in that property for a specific period of time, which can be for hundreds of years. A “freeholder” or “Landlord” on the other hand not only owns the property, but also the land that the property is built on for an unlimited period of time. Owning the freehold interest in your property provides you with absolute control over it and effectively allows you to do whatever you want with it (subject to the law and planning permissions for example). It also often impacts upon land values, especially if that lease is getting towards the end of its life where the financial investment may be significantly greater in a freehold property than a lease with just a few years left to run. This is why some people would prefer owning the freehold interest over the leasehold interest.

If you own the leasehold of your home and you wish to buy the freehold interest in it, it is advisable to first get in touch with the freeholder with a view to agreeing the purchase informally. This will considerably reduce costs which you may otherwise incur.

If you find that you’re unable to come to agreement with your freeholder for whatever reason, perhaps you’ve been liaising with them for months now without any progress, it may then be appropriate for you to seek to utilise the more formal routes that may be available to you. “Enfranchisement” is the term used to describe the right to buy the freehold. It is also used when looking to pursue the right to a lease extension, another option if the freehold cannot be purchased or you do not want to.

Under the Leasehold Reform Act 1967, you may be able to buy the freehold in your home (or extend your lease) but only if you are a “qualifying tenant”. To be a “qualifying tenant”, you have to satisfy each of the following conditions:

  • Your lease has to be of a house (and not for example, a flat).
  • Your lease must be a long one granted for more than 21 years (certain other leases also qualify which are beyond the remit of this article).
  • You must have been the legal owner of the lease for at least 2 years immediately before serving notice requesting your right to buy.
  • If you have what’s considered an “excluded tenancy”, the rent you pay under the lease must be low.
  • There must be no subtenant who has rights under the Leasehold Reform Act 1967.
  • In certain circumstances you must satisfy a residence test.

To exercise your right to buy, you must serve notice of your claim. The notice has to be in the prescribed form or in a form that, for the most part, has the same effect. The notice should provide sufficient information as to what your notice relates, on whom it is being served and ultimately how your right to acquire the freehold (or extend your lease) has arisen, with all relevant documentation enclosed.

Serving notice of your claim then starts the process under the Leasehold Reform Act 1967. Whilst the Act is there to ultimately protect tenants from landlords who drag their feet, that is not to mean that the process under the legislation is easy to follow. The Act sets out a strict timetable for progressing your claim. For example, whilst a tenant can withdraw their notice of claim to buy the freehold at anytime up to one month after agreeing the purchase price, if they end try to withdraw after this one month period is up, they are unfortunately bound to complete in line with the statutory contract between the parties. The Act also looks to protecting landlords too. For example, by ensuring that a tenant is not able to serve a further notice to the buy the freehold for 12 months following withdrawal.

In the Civil and Commercial Litigation Department, we have the knowledge to explain the process to you allowing you to make informed decisions at every stage with a view to reaching your objectives, whilst keeping an eye on proportionality and ensuring costs to you are kept to a minimum. Legislation on enfranchisement is extremely complicated and very few landlords or tenants are able to navigate the procedure and reach agreement within the statutory deadlines without professional assistance. We are open for business. The current situation should not stop you from looking to protect your future and your investment. If you think you might need our help, get in touch now on 0800 389 7093 or contact us via our online form and we will be happy to help.

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