LEASEHOLD ENFRANCHISEMENT

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The Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) gives long leasehold tenants the right to compel the freeholder to transfer the freehold of the building to them. 

If the qualifying criteria set out in the 1993 Act are met, the tenants may have a right to acquire the building, along with the roof and airspace which will hinder or prevent further development by the current owner. That claim may be served at any time. It is entirely separate to the right of first refusal process.

If the qualifying criteria set out in the 1993 Act are met, the tenants may have a right to acquire the building. 

An airspace lease can help put the airspace at arms-length and whether such a lease can be acquired under depends on whether the same are deemed “common parts”. 

There is case law on the point (Panagopoulos v Earl Cadogan [2011] Ch. 177  and LM Homes Ltd v Queen Court Freehold Co Ltd [2020] EWCA Civ 371 as examples) wherein it was considered whether the tenants involved in the enfranchisement can properly manage both the building and the common parts without the need to acquire the rooftop.

There is a risk that the qualifying tenants in the building will launch an enfranchisement claim after purchase and during a build. The premium calculated in accordance with the 1993 Act is unlikely to match the purchase price payable under the sale contract nor will it cover any build cost losses. We can help advise on this risk.

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