Freehold Enfranchisement, How Leaseholders Can Buy Their Freehold

What is Freehold Enfranchisement?

Freehold enfranchisement, formally called collective enfranchisement, is the statutory right for qualifying leaseholders in a building to compulsorily purchase the freehold from the freeholder. It is governed primarily by the Leasehold Reform, Housing and Urban Development Act 1993, as significantly amended by the Leasehold and Freehold Reform Act 2024.

Once leaseholders own the freehold, they control building management, can extend their own leases to 990 years at a peppercorn ground rent, and eliminate the financial relationship with an external freeholder.

Qualifying Conditions

The Leasehold and Freehold Reform Act 2024 extended rights in several respects, including removing the requirement that participants must have owned their lease for two years before making a claim.

Valuation, How the Price is Calculated

The price paid for the freehold is determined by statute, not negotiation, and has three main components:

• Ground rent capitalisation, the present value of the ground rent income the freeholder is entitled to receive
• Reversion value, the value of the freeholder's reversionary interest when each lease expires
• Marriage value, where any participating flat has a lease with fewer than 80 years remaining, the freeholder may be entitled to share in the additional value created by combining freehold and leasehold interests

A RICS-qualified leasehold valuation surveyor should prepare the valuation on behalf of participating leaseholders. Both parties can agree the price, or either may apply to the First-tier Tribunal (Property Chamber) if agreement cannot be reached.

The Enfranchisement Process

1. Form a nominee purchaser, typically a company limited by guarantee

2. Serve the Initial Notice (Section 13 notice) on the freeholder, stating the proposed purchase price and names of all participating leaseholders

3. The freeholder serves a Counter Notice either admitting the right or disputing it. If they admit the right but dispute the price, negotiation and potentially a Tribunal application follows

4. Once the price is agreed or determined, the transaction proceeds to completion

Costs to Budget For

Participating leaseholders must cover their own legal and valuation fees and, by statute, the freeholder's reasonable legal and valuation fees. For a block of flats, combined professional fees commonly run to several thousand pounds per flat. Property Passport UK can help centralise building documentation to support the due diligence process.