Expert legal advice for leaseholders seeking to buy their freehold or extend their lease — collective enfranchisement, right to manage, individual lease extensions and the Leasehold and Freehold Reform Act 2024.
Leasehold Enfranchisement: Legal Advice for Leaseholders & Freeholders
Leasehold enfranchisement is the legal process by which leaseholders acquire rights over their property — whether by purchasing the freehold (collectively or individually), extending their lease, or taking over management of the building. These rights are some of the most valuable available to residential leaseholders and are governed by a complex body of legislation that has recently been significantly reformed by the Leasehold and Freehold Reform Act 2024.
Legal Merchant's specialist solicitors advise both leaseholders seeking to exercise their enfranchisement rights and freeholders responding to or defending enfranchisement claims throughout England and Wales.
Leasehold Reform Act 2024 — Major Changes. The Leasehold and Freehold Reform Act 2024 significantly expands leaseholders' rights — including making it easier and cheaper to extend leases and buy freeholds, and abolishing the two-year ownership rule for lease extensions. Many provisions are being phased in. Our solicitors keep up to date with all changes and advise on the current position.
Types of Enfranchisement Right
Collective Enfranchisement
Two or more qualifying leaseholders in a building jointly purchase the freehold under the Leasehold Reform, Housing and Urban Development Act 1993. The freehold is then typically held through a residents' management company (RMC). A powerful right that eliminates ground rent and gives full control of the building.
Individual Freehold Purchase (Houses)
Leaseholders of houses (as opposed to flats) can purchase the freehold individually under the Leasehold Reform Act 1967. The qualification criteria and valuation method differ from flat leaseholders' rights and have been substantially reformed.
Statutory Lease Extension
Individual leaseholders of flats can extend their lease by 90 years (and leaseholders of houses by 50 years) under the 1993 Act, at a peppercorn ground rent, at a premium determined by a statutory valuation formula. No agreement of the freeholder required.
Right to Manage (RTM)
Leaseholders can collectively take over management of their building — appointing their own managing agents and taking control of service charges — without purchasing the freehold and without needing to prove any fault by the landlord. An RTM company must be formed.
Collective Enfranchisement: How It Works
Qualifying Conditions
To exercise the right of collective enfranchisement, the following conditions must be met:
The building — must be a self-contained building or part of a building (with or without appurtenant land), not more than 25% of the floor area used for non-residential purposes (raised from 25% to 50% under the 2024 Act for some purposes)
Qualifying leaseholders — must be leaseholders of flats in the building holding leases originally granted for more than 21 years. Under the 2024 Act, the two-year minimum ownership requirement has been abolished.
Participation threshold — at least 50% of the qualifying leaseholders must participate in the claim
Excluded buildings — certain buildings are excluded (e.g., where the freeholder is a charitable housing trust, or where more than 25% of the building is non-residential) — though the 2024 Act modifies some exclusions
The Collective Enfranchisement Process
Participation agreement — participating leaseholders sign a participation agreement and contribute to costs
Form an enfranchisement company (nominee purchaser) — typically a residents' management company limited by guarantee
Valuation — surveyors value the freehold using the statutory formula
Initial notice — the nominee purchaser serves an initial notice on the freeholder under section 13 of the 1993 Act
Freeholder's counter-notice — the freeholder has two months to respond, admitting or denying the right and proposing terms
Negotiation — the parties negotiate the price and terms of the transfer
Tribunal determination — if no agreement is reached, the First-tier Tribunal determines the premium and terms
Completion — the freehold transfers to the nominee purchaser on agreed terms
Statutory Lease Extension: Key Features
The statutory lease extension process for flat leaseholders (under the Leasehold Reform, Housing and Urban Development Act 1993, as amended) provides for:
Extension term — 90 additional years added to the unexpired term of the existing lease (proposed to increase to 990 years under future reforms)
Ground rent — reduced to a peppercorn (effectively nil) for the extension term
Premium — calculated using a statutory formula based on the property value, years remaining, existing ground rent and a deferment rate. The 2024 Act reforms the valuation methodology, generally reducing premiums.
No agreement required — the right is exercised by serving a tenant's notice on the landlord. If agreement is not reached, the tribunal determines the premium.
Two-year rule abolished — under the 2024 Act, leaseholders no longer need to have owned their lease for two years before claiming an extension
Right to Manage (RTM)
The Right to Manage allows leaseholders to take over management of their building without purchasing the freehold and without needing to prove fault by the landlord. Key features:
An RTM company (a company limited by guarantee) must be formed with the participating leaseholders as members
At least 50% of the qualifying flats must participate
A notice of invitation to participate is given to all leaseholders before serving the RTM notice on the landlord
The landlord can serve a counter-notice admitting or denying the right
If the right is disputed, the tribunal determines whether it exists
Once RTM is acquired, the RTM company takes over management functions — appointing managing agents, collecting service charges, granting consents
Freeholder's Perspective: Responding to Enfranchisement Claims
Our solicitors also advise freeholders and landlords responding to enfranchisement claims:
Reviewing initial notices for technical invalidity (errors in notices can invalidate the claim)
Preparing counter-notices and negotiating premium and terms
Defending the right to enfranchise where qualification criteria are not met
Preparing for and representing landlords at First-tier Tribunal hearings on premium
Advising on the freeholder's right to purchase back a long lease at the nominee purchaser's price (leaseback rights)
Managing the impact of enfranchisement on head leases, mortgages and third-party rights
Frequently Asked Questions
The premium for collective enfranchisement is determined by a statutory formula under the 1993 Act and is effectively the sum of: (1) the capitalised ground rent (the investment value of the right to receive ground rents); (2) the reversion value (the value of the freeholder's right to the property at the end of the leases); (3) the marriage value (the uplift in value created by merging the freehold and leasehold interests, shared 50/50 with the leaseholders) — though the 2024 Act proposes to abolish marriage value for leases with more than 80 years unexpired; and (4) any other compensation (e.g., for diminution in value of other parts of the freeholder's property). The 2024 Act significantly reforms the valuation methodology, generally reducing premiums for leaseholders.
A freeholder cannot refuse to sell if the qualifying conditions for collective enfranchisement are met — the right to buy the freehold is a statutory right, not a contractual one. The freeholder can serve a counter-notice disputing the right (e.g., on grounds that the qualifying conditions are not met) or disputing the price and terms. If the freeholder disputes the right to enfranchise, the First-tier Tribunal determines whether the right exists. If the freeholder simply fails to agree a price, the tribunal sets the premium. Our solicitors deal with disputed enfranchisement claims at both the negotiation stage and before the tribunal.
The costs of collective enfranchisement include: the premium payable to the freeholder (the largest cost); your own solicitors' and surveyors' fees; the freeholder's reasonable legal and valuation costs (which you are obliged to pay under the 1993 Act); Land Registry registration fees; and SDLT where applicable. Total costs vary significantly depending on the building's value, the complexity of the title, and whether the matter proceeds to the tribunal. Our solicitors provide a detailed cost estimate at the outset. The long-term financial benefits of owning the freehold — elimination of ground rent, control of service charges, ability to grant lease extensions at nil premium — typically far outweigh the upfront costs.