enfranchisement
📖 What is enfranchisement? Meaning and definition
Enfranchisement refers to the right of qualifying tenants to buy the freehold of their leasehold property. This process is governed by specific legislation, such as the Leasehold Reform, Housing and Urban Development Act 1993, which outlines the conditions and procedures for such acquisitions. The aim is to allow tenants to gain full ownership, moving from a leasehold arrangement to owning the freehold.
When tenants pursue enfranchisement, a key aspect is the determination of the 'premium' – the price to be paid for the freehold interest. This premium is calculated based on factors like the value of the freeholder's interest and compensation for any other losses the freeholder might incur. In some cases, the calculation might exclude the freeholder’s share of 'marriage value' if certain exceptions, such as those related to the property's rateable value, apply.
The process often involves an application to a tribunal for a determination of this premium and the terms of acquisition, especially if the landlord cannot be found or if there are disputes over the valuation. The costs incurred by the landlord during the enfranchisement process, such as those related to the initial notice, are typically recoverable from the tenant, but these costs must be reasonable and proportionate.
📋 Requirements
- The applicant must be a qualifying tenant.
- The enfranchisement must be pursued under relevant legislation, such as the Leasehold Reform, Housing and Urban Development Act 1993.
- A premium must be paid for the collective enfranchisement.
- The property's rateable value at April 1990 may affect the calculation of the premium.
📝 Procedure
- An application is made by qualifying tenants, sometimes with a court order dispensing with the requirement to serve notice.
- A court may order that the freehold shall be vested in persons appointed by the claimants.
- Applicants apply to a tribunal for a determination of the premium and terms of acquisition.
- The tribunal sets the appropriate premium payable for the collective enfranchisement.
- Costs incurred by the landlord in the process are assessed to ensure they are reasonable and proportionate.
💡 Examples
- A group of tenants in a block of flats applied to the tribunal to determine the premium for the collective enfranchisement of their building, as their landlord could not be located.
- The tribunal had to decide the price a tenant would pay for the freehold of their property, taking into account the property's rateable value from 1990 to see if certain compensation rules applied.
- A tenant sought to purchase the freehold of their home, and the court had to ensure that the landlord's legal costs for the enfranchisement process were reasonable and not excessive.
- A county court ordered that the freehold of a property should be transferred to the tenants, with the specific terms and premium to be decided by a tribunal.
📚 Legal basis
- Leasehold Reform, Housing and Urban Development Act 1993
❓ Frequently asked questions
What is the 'premium' in enfranchisement?
The 'premium' is the price that qualifying tenants must pay to purchase the freehold interest of their property. This amount is determined by a tribunal, considering factors like the freeholder's interest and any other losses.
Does enfranchisement apply to all leasehold properties?
Enfranchisement applies to 'qualifying tenants' and properties under specific conditions outlined in legislation like the Leasehold Reform, Housing and Urban Development Act 1993. The property's rateable value at a certain date can also be a factor.
What if the landlord cannot be found during the enfranchisement process?
If the landlord cannot be found, a court may dispense with the requirement to serve notice, and the freehold can still be vested in the tenants, with the premium and terms determined by a tribunal.
Who pays the costs associated with enfranchisement?
The applicant tenant is typically responsible for the landlord's reasonable costs incurred in pursuance of the initial notice and in connection with the purposes listed in the Act. These costs are subject to a test of proportionality.
What is 'marriage value' in the context of enfranchisement?
Marriage value refers to the increase in the property's value that arises when the freehold and leasehold interests are merged. In some enfranchisement cases, particularly those falling under specific exceptions, no payment is made for the freeholder’s share of this marriage value.