How do we buy the freehold of our block of flats?

Collective enfranchisement — the right of the flat owners in a building to buy the freehold together. Who qualifies, how the group organises itself, and what actually changes afterwards.

Difficulty: advanced
Time: 16 min
Read: 5 min
Safety: caution

Short answer

Qualifying leaseholders of at least half the flats in a qualifying building can act together to buy the freehold. You form a company or appoint a nominee purchaser, sign a participation agreement, get a valuation, and serve an initial notice. The landlord serves a counter-notice, and the tribunal decides the price if it is not agreed. Afterwards you grant yourselves long leases at a peppercorn rent and take over management.

This is the permanent version of a lease extension: instead of buying more years from a landlord, the leaseholders buy out the landlord. It is more work, it costs more up front, and it removes the problem for good — no more lease extensions, no more freeholder consent for alterations, and control of the service charge. Its difficulty is almost never legal; it is getting enough neighbours to commit money at the same time.

Safety

Collective enfranchisement is a group legal project with real cost and real deadlines, and the participants are jointly committing money before the price is known. Do not serve a notice without a valuation, a written participation agreement between the flat owners, and a solicitor who does this work. The valuation rules are being reformed and no figure appears in this guide for that reason.

Step by step

Check the building qualifies.The building must contain at least two flats, the majority of which are held by qualifying leaseholders on long leases, and non-residential parts must not exceed a proportion of the floor area. Some buildings are excluded. Have a solicitor confirm it before you spend anything.
Count the participants.At least half the flats in the building must participate. In a two-flat building both must. This is where most attempts stop, and it is worth establishing the appetite informally before any professional is instructed.
Agree who pays for what, in writing.A participation agreement records who is in, what share each pays, what happens if someone drops out or sells, and who has authority to negotiate. Without one, a single wavering neighbour can collapse the project after the group has spent thousands.
Set up the nominee purchaser.Usually a company limited by guarantee in which each participating flat holds a share. It buys and holds the freehold. Setting it up properly at the start avoids restructuring later.
Get a valuation from a leasehold valuer.The premium reflects the value of the freehold interest and the value of the leases. As with lease extensions, the valuation rules are being reformed and parts are not in force. Instruct a valuer who does enfranchisement work.
Serve the initial notice.A formal notice from the participating leaseholders naming the nominee purchaser and proposing a price. The landlord serves a counter-notice by a deadline, and the parties then negotiate. If terms are not agreed, an application to the First-tier Tribunal follows within a defined window.
Budget for both sides' costs.Your solicitor and valuer, the landlord's reasonable costs, company formation, and the conveyancing. Government has consulted on capping landlords' costs and the caps are not in force. Get written estimates before serving anything.
Plan what happens on completion.The company owns the freehold. Participants normally grant themselves extended leases at a peppercorn rent immediately, which is far cheaper than doing it later. Non-participating flats keep their existing leases and become your leaseholders.
Prepare to be the landlord.You now collect service charges, insure the building, arrange repairs, comply with consultation requirements for major works, and deal with any leaseholder who does not pay. Most groups appoint a managing agent, which is a cost the group now controls rather than inherits.
Consider Right to Manage as a first step.If the problem is management rather than lease length, Right to Manage achieves control without buying anything and without needing to prove fault. Many groups do that first and enfranchise later.
Handle an absent landlord through the court.Where the freeholder cannot be traced, there is a court route to acquiring the freehold. It is slower and it is well established.

Tips

Hold an informal meeting and count genuine commitments before instructing anyone. The legal work is straightforward; the neighbours are not.
Ask the solicitor for a written estimate covering both sides' costs before the notice is served.
Decide who will manage the building afterwards before you own it. Groups that leave it until completion tend to end up paying more than the freeholder did.

Common mistakes

Serving the notice before the participation agreement is signed — The notice starts strict deadlines and commits the group to costs. A neighbour changing their mind at that point is expensive for everybody else.
Not granting the extended leases at completion — Doing it later is a separate transaction with separate costs. Doing it at the same time is the cheap moment.

If it doesn't work

A participant wants to pull out after the notice was served

Cause: No participation agreement, or one that does not deal with withdrawal — Fix: This is exactly what the agreement exists to prevent. If there is one, follow it. If there is not, take advice quickly — withdrawal can jeopardise the claim as well as the funding.

The landlord's counter-notice disputes qualification

Cause: A challenge to the building or to the participants — Fix: Deadlines run from the counter-notice and are short. Get your solicitor onto it immediately; qualification disputes are decided by the tribunal and delay can end the claim.

Nobody wants to lead the project

Cause: It is genuinely a lot of unpaid work — Fix: Agree at the outset that the group will pay a solicitor to project manage, and share the cost. Groups that rely on one enthusiastic neighbour usually stall when that person moves.

Questions people ask

What if some neighbours will not join?

You need at least half the flats. Non-participants simply keep their leases and become leaseholders of the new freehold company. They can usually be allowed to join later, on terms the company sets — which is why the participation agreement should deal with it in advance.

How long does it take?

Typically many months, and longer where the price goes to the tribunal or the landlord is hard to trace. The statutory deadlines are strict, so the timetable is driven by them once the initial notice is served.

Is it the same as share of freehold?

Share of freehold is the result. Each flat is still leasehold; the leaseholders jointly own the freehold company that grants those leases. The service charge and the management do not disappear — they become yours.

Can we do it if there are shops on the ground floor?

Yes, provided the non-residential parts do not exceed the permitted proportion of the internal floor area. That proportion is one of the qualifying tests a solicitor checks at the outset.

Does it apply in Scotland or Northern Ireland?

No. This is England and Wales. Scotland does not use residential leasehold in this form and Northern Ireland has its own legislation.