April 24, 2024 12:13 pm

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Nikka Sulton

Since 1967, tenants with long leases on houses have been granted the right to either acquire the freehold of their property or extend the lease by an additional 50 years. While the option to extend the lease is available, it’s relatively uncommon compared to the desire to acquire the freehold outright. In the following frequently asked questions (FAQs), we’ll delve deeper into the process and considerations involved in exercising the right to acquire the freehold.


What are the qualifying criteria?

The key criteria for exercising the right to acquire the freehold of a property are as follows, though exceptions and special cases apply:

  • The property must be a house.
  • The house must be held under a long lease, typically for more than 21 years.
  • You must have owned the house for over two years, starting from the registration date at the Land Registry. However, if you inherited the tenancy after a family member’s death and have been a resident, you may still qualify within this timeframe.

Residency in the property is no longer a prerequisite for exercising this right; ownership is the sole qualifying factor.

Determining whether a building qualifies as a house can sometimes be challenging, especially if it incorporates commercial elements. The property must be self-contained and vertically separated from adjacent properties. Enfranchisement rights do not apply if a significant portion of other premises extends beneath or above your house, or if your house protrudes into or under adjoining property.


What are some of the exceptions preventing you from qualifying?

Here are the main conditions:

  • If the house is let under multiple tenancies, only the tenant with the least interest can acquire the freehold.
  • Business tenants under the Landlord and Tenant Act 1954 typically don’t qualify, unless the tenancy exceeds 35 years and the tenant has resided in the house as their main residence for at least two years within a ten-year period.
  • Specific shared ownership leases may not qualify.
  • Tenancies protected under the Agricultural Holdings Act 1986 are excluded.
  • If the landlord is the National Trust, or a public body with a development certificate under Section 28 of the 1967 Act, the right to acquire may not apply.


How much will I have to pay?

The valuation process involves intricate formulas centred on ground rents, yields, and the remaining lease term. If your lease has less than 80 years left, you might face additional costs due to “marriage value,” significantly raising the price.

Moreover, you’ll be responsible for the landlord’s reasonable professional fees, covering solicitors’ and surveyors’ expenses for assessing your claim and managing the statutory process. Additionally, you’ll need to provide a statutory deposit, typically three times the annual rent, which can be substantial if the rent isn’t nominal.

Your own professional expenses, including solicitor and surveyor fees, may escalate, especially if the matter requires referral to the First-tier Tribunal (FTT). Conveyancing charges such as stamp duty land tax and Land Registry fees, alongside incidental costs like search fees, should also be considered.


Will I need a formal valuation before bringing a claim?

It’s crucial to plan ahead and assess your financial capabilities before initiating the process. Unlike claims for lease extension or collective enfranchisement, serving an initial notice for a house entails a binding contract. Failure to proceed can result in losing your deposit. However, you retain the right to withdraw within one month of the price being determined or agreed upon.


Can the landlord impose any restrictions on the freehold?

The Act outlines the rights and covenants from your lease that remain applicable to the freehold post-acquisition. This detail is critical as it could restrict your ability to undertake future property redevelopment.


What if the freeholder disputes my entitlement to claim or we cannot agree on the price?

In cases of dispute over entitlement, it must be resolved in a county court. If agreement on the freehold transfer terms or price cannot be reached, it’s referred to the FTT. This process can be both time-consuming and costly. Regarding costs in the county court, the losing party typically covers the winner’s expenses. Conversely, in FTT determinations, each party usually bears their own costs.


What happens when everything is agreed/determined?

Once the disputed terms are settled, either through agreement or via FTT/county court, the freehold transfer can proceed, with payments made accordingly. Pre-completion conveyancing searches are conducted at the Land Registry, and upon completion, the transfer is submitted for registration. Any stamp duty land tax is settled at this stage. The Land Registry finalizes registration, typically within 55 business days, during which your existing lease is cancelled as part of the process.





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