Collective Enfranchisement — How Flat Owners Can Buy Their Building’s Freehold

What Is Collective Enfranchisement?

Collective enfranchisement is the statutory right for leaseholders in a block of flats to join together and purchase the freehold of their building. The right is set out in Part I of the Leasehold Reform, Housing and Urban Development Act 1993. Once the freehold is purchased, leaseholders own the building entirely — there is no longer a separate landlord. They typically form a company to hold the freehold and grant themselves new long leases at a peppercorn rent.

Qualifying Criteria

The building and the participating leaseholders must meet strict qualifying tests.

**The building must:**

• Contain at least two flats held by qualifying tenants
• Have no more than 25% of its floor area used for non-residential purposes (the Leasehold and Freehold Reform Act 2024 increases this threshold to 50% once commenced)
• Be a self-contained building or self-contained part of a building with a vertical division

**The participating leaseholders must:**

• Include at least 50% of all the flats in the building (not just qualifying tenants — half of all flats)
• Hold long leases (originally granted for more than 21 years)
• Not include more than two flats owned by the same person where the building contains four or fewer flats

The two-year ownership requirement has been abolished by the 2024 Act (once commenced).

The Process

**Step 1: Instruct solicitors and a surveyor.** Collective enfranchisement is a specialist area. You need a solicitor experienced in enfranchisement and a RICS-registered surveyor to advise on the premium.

**Step 2: Form a nominee purchaser.** The participating leaseholders must nominate a person or company to act as the purchaser of the freehold. In practice this is almost always a company — either a new Residents’ Management Company (RMC) or a Right to Manage company — in which the participating leaseholders hold shares.

**Step 3: Serve the Section 13 initial notice** on the freeholder. This notice must state the proposed purchase price and other terms. It triggers the freeholder’s obligation to respond. Serving this notice creates a binding obligation on the participating leaseholders to proceed; withdrawing from the process after this point can make you liable for the freeholder’s costs.

**Step 4: The freeholder serves a counter-notice** within two months. They must either admit the right to enfranchise (in which case negotiation on price begins) or allege that the qualifying criteria are not met.

**Step 5: Negotiation.** The parties negotiate the premium. If agreement is not reached within six months of the counter-notice, either party can apply to the First-tier Tribunal to determine the terms.

**Step 6: Completion.** The freehold transfers to the nominee purchaser. Your solicitor registers the new title at HM Land Registry.

How the Premium Is Calculated

The premium for collective enfranchisement is calculated by reference to the freehold value, using a formula similar to individual lease extension. It includes:

• The value of the freeholder’s interest (ground rents, reversion)
• The share of any ‘marriage value’ where leases are below 80 years (the 2024 Act abolishes marriage value once commenced)
• Compensation for any other loss to the freeholder

For a typical London block of ten flats, premiums can range from £150,000 to over £1,000,000 depending on ground rents, lease lengths, and property values. Each participating leaseholder contributes their proportionate share.

Professional Costs

In addition to the premium, budget for:

• Solicitor costs (your side): £3,000–£6,000 per flat
• Surveyor costs (your side): £2,000–£4,000 per flat
• Freeholder’s reasonable legal and surveyor costs (payable by leaseholders): similar amounts
• Company formation and Land Registry fees

Total professional costs per flat typically range from £6,000 to £12,000.

Benefits of Owning the Freehold

• No ground rent, ever
• Full control over building insurance and managing agent selection
• Future lease extensions for participating (and non-participating) leaseholders at minimal cost
• No freeholder to seek consent from for alterations
• Ability to enforce lease obligations against other leaseholders directly

Downsides and Responsibilities

Owning the freehold means taking on responsibility for the management of the building — or appointing and overseeing a managing agent to do so. This is a real obligation, not just a benefit. Leaseholders who are not engaged or do not get on may find disputes within the freeholding company difficult to resolve.

Non-participating leaseholders in the building do not automatically benefit from the purchase, but they have the right to buy a share of the freehold in the future and to obtain lease extensions at low cost from the new freeholder company.

Property Passport UK records freehold ownership, registered charges, and enfranchisement activity on property titles, giving leaseholders visibility of their building’s ownership structure.