Leasehold Enfranchisement of Houses

The valuation of a premium to buy the freehold (enfranchise) a house is more specialised, as are the negotiation of the matters relating to the Leasehold Reform Act 1967.

The Leasehold Reform Act 1967 enables the tenant of a house on a long lease to enfranchise.

Surprisingly a house can be many things. For example, we have dealt with “traditional” houses, shops with residential above, pubs with residential, office buildings with residential, a hospital with residential and even a block of flats. Even though the legislation in its basic form has been around since 1967 there are still significant cases relating to what constitutes a house.

The basis definition is contained in Section 2(1) of the Leasehold Reform Act 1967:

“For purposes of this Part of the Act, ‘house’ includes any building designed or adapted for living in reasonably so called, not withstanding that the building is not structurally detached, or was not or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes; …”

Therefore, it is necessary to address the following: Does the building qualify? Does the lease qualify? Does the tenant qualify?

Qualification Criteria:

In order for the building to qualify, it must be a ‘house’. But, there must be no material over or under-hang with an adjoining building (if there is, then it is likely to be a flat).

The lease must comprise the whole of the “house” and it must be a long tenancy, i.e., a lease with an original term of more than 21 years. However, if it is a business tenancy, then it will not qualify lease term is not at least 35 years.

The tenant must have owned the lease of the house for a period of at least two years before the date of the claim.

Prior to the Commonhold and Leasehold Reform Act 2002 Act it was necessary for the tenant to occupy the house as his only or main residence for a three year period. The residence test has now been abolished save in limited circumstances.

If a house is mixed use so that there is a business tenancy (for example a building comprising a shop with a flat above) or if the house includes a flat which is subject to a qualifying lease under the 1993 Act then the tenant will still be required to fulfil the residence test. The current residence test is that the tenant has occupied the ‘house’ as his only or main residence for two years or periods amounting to two years in the preceding ten years.

Method of Valuation:

There are several methods of valuation set out in Section 9 of the 1967 Act. The method of valuation depends on a number of factors including, the historic rateable value of the property, the level of ground rent and whether the lease qualifies only due to later amendments to the 1967 Act.

We are able to assist with the determination of method of qualification. Unlike the 1993 Act where premium is the key to the initial Section 42 or Section 13 Notice, for the enfranchisement of a house, the key to the Notice is whether sections 9(1) (the “Original Basis of Valuation”) or Sections 9(1A), 9(1B) or 9(1C) (the “Special Basis of Value”) apply.

The application of the correct basis of valuation is essential as the difference in premium payable can be startling.

Where we act:

We are able to act throughout the UK, but have particular expertise in prime central London. We have acted against most of the major estates, such as Bedford, Cadogan, Cambridge, Church Commissioners, The Crown, Eton, Eyre, Grosvenor, Howard de Walden, John Lyon, Myron Wilson, Portman and Sloane Stanley Estates. We regularly provide expert advice in proceedings at the Leasehold Valuation Tribunal (LVT) and at Court.

We also act regularly in suburban South London, particularly in Croydon and Sutton.  We also service the corridor between these areas and the South Coast, in places such as Brighton, Lewes and Hastings. In suburban areas we often act for tenants against Freshwater.

Contacts
Justin Bennett: jlb@lbb.org.uk

• Look at our published articles on Leasehold Enfranchisement 
• More detailed advice and a “rough guide” premium calculator can be found at www.leaseholdenfranchisement.co.uk