When a Freehold Claim Goes Flat
The majority of flat owners in England and Wales have a legal right to club together with their fellow tenants to purchase the freehold interest in their building.
There are numerous, potential benefits associated with making these sorts of claims, including:
- taking control of the management and maintenance of the building, and the associated expense involved
- possible improvements to the open market value of the individual flats, and general investment appeal
- granting themselves more generous leases
A number of preconditions must be met, including the need for at least 50% of the flat owners to participate in the claim.
The process can be quite costly and complex, so thorough preparation, together with expert valuation and legal advice is strongly recommended.
If a valid claim is made to the flat owners’ landlord, the landlord must sell (unless there is a valid reason not to). The key sticking point is often the price.
But, some landlords will take whatever steps they reasonably can to resist such claims…
A challenging road ahead
Flat owners making a claim are required to pass numerous hurdles on the way towards the Promised Land where they end up owning their own building. It can often appear as if the odds are stacked in the landlord’s favour.
The owners must, for example, not only pay for their own legal and valuation costs but also the landlord’s (up to a point).
The various legal steps leading towards completion of the purchase must also be followed, by and large, to the letter.
Unscrupulous or not?
Some landlords are large institutions, usually investment companies. They will own multiple properties, collectively providing returns from ground rents and other, administrative charges. Parting company with those buildings is far from attractive from their point of view. Any dilution of the number of properties in their portfolio will affect their bottom line.
These landlords (and, more to the point, their solicitors) are, therefore, more likely to pay very close attention to their tenants’ (flat owners’) attempts to buy the building. After all, they have investments and potential profits to protect. They will look to identify any flaws in the tenants’ notice of claim (which must include various, prescribed information and be sent to the correct persons), as well as check that the flat owners/their lawyers have not missed any statutory time limits (of which, there are several).
Certain landlords may also take up the entire time allowed to them to address certain obligations of theirs (landlords have, for example, two months to produce a reply/counter-notice to the owners’ initial notice of claim and further time is available for the price to be negotiated). Cynics will argue that this is to ensure they maximise the rent and other charges payable under the flat owners’ Leases for the longest period possible.
Such practices are entirely lawful but some might question whether they are conscionable.
Suffice it to say, if a group of flat owners slips up, at any point in the legal process, the consequences can be costly.
Make sure you read our Guide to Buying the Freehold of Your Flat for further information about what is entailed when making a claim. And speak with John Appleby, a Leonard Gray partner and Property Law specialist, if you have any particular queries or concerns about your own flat. If you have not yet discussed a potential purchase with your neighbours, now may be the time to consider doing so.