Right to Collective Enfranchisement under the Leasehold Reform Housing and Urban Development Act 1993
| Author | Piers Harrison/David Lonsdale |
| Pages | 83-94 |
INTRODUCTION
4.1 Section 1(1) of the Leasehold Reform Housing and Urban Development Act 1993 (1993 Act) gives qualifying tenants of flats contained in premises to which Chapter I applies on the relevant date the right to acquire the freehold of those premises by a nominee purchaser and at a price determined in accordance with the chapter. Under section 1(8), the ‘relevant date’ is defined as the date on which the notice of the claim is given under section 13.
4.2 This right to collective enfranchisement is particularly valuable where the tenants wish to take over the management function often carried out by the freeholder. For the purchase to work successfully, strong co-operation and organisation are required between the participating tenants. Where the freeholder is managing the building satisfactorily, individual lease extension will often be the more attractive option.
4.3 The 1993 Act was amended by the Commonhold and Leasehold Reform Act 2002 whereby the right of collective enfranchisement was to be exercised by a Right to Enfranchise (RTE) company. However, this reform has never been implemented and so, for the foreseeable future, the right will continue to be exercised by a nominee purchaser. Therefore this chapter does not cover RTE companies.
PROPERTY INCLUDED
4.4 Essentially, the right is to acquire the freehold of the premises in which the qualifying tenants’ flats are contained.
84 Leasehold Enfranchisement: Law & Practice
4.5 However, section 1(2) and (3) of the 1993 Act gives the qualifying tenants the right to acquire appurtenant property which is demised by a lease held by a qualifying tenant. In section 1(7), ‘appurtenant property’ is defined as including ‘any garage, outhouse, garden, yard or appurtenances belonging to, or usually enjoyed with, the flat’.
4.6 The appurtenant property need not be owned by the same landlord. It must, however, be demised by the lease of a flat held by a qualifying tenant. Therefore, if it is let under a separate lease it will not be included unless there are separate long leases of the flats and appurtenant property with the same landlord, in which case there is deemed to be a single long lease (section 7(6) of the 1993 Act). Property included in the lease of a non-qualifying tenant is not included.
4.7 There is also the right to include in any claim property which a qualifying tenant is entitled to use under the terms of his lease of his flat together with other premises (section 1(3)(b) of the 1993 Act). However, the freeholder is entitled to, instead, grant such permanent rights as will ensure that the occupier of the flat in question will have, as nearly as may be, the same rights as he had at the time of serving the notice (section 1(4)(a)).
4.8 So, for example, a qualifying tenant may have the right to use a communal garden under the terms of his lease at the time of making the claim. The freeholder would be entitled, as an alternative to conveying the freehold, to grant a permanent easement over the garden.
4.9 Moreover, the freeholder can elect to convey the freehold of other property over which permanent rights could be granted (section 1(4)(b) of the 1993 Act).
4.10 So, for example, a qualifying tenant may have the right to use a tennis court under the terms of his lease. The freeholder could, instead, agree to convey the freehold of another tennis court in the near vicinity.
4.11 Upon exercising their right to collective enfranchisement, qualifying tenants are obliged to acquire certain leasehold interests and are entitled to acquire others. Section 2 of the 1993 Act is as follows:
(1) Where the right to collective enfranchisement is exercised in relation to any premises to which this Chapter applies (‘the relevant premises’), then, subject to and in accordance with this Chapter—
(a) there shall be acquired on behalf of the qualifying tenants by whom the right is exercised every interest to which this paragraph applies by virtue of subsection (2); and
(b) those tenants shall be entitled to have acquired on their behalf any interest to which this paragraph applies by virtue of subsection (3);
and any interest so acquired on behalf of those tenants shall be acquired in the manner mentioned in paragraphs (a) and (b) of section 1(1).
(2) Paragraph (a) of subsection (1) above applies to the interest of the tenant under any lease which is superior to the lease held by a qualifying tenant of a flat contained in the relevant premises.
4.12 The wording of section 2(1)(a) of the 1993 Act is mandatory (‘there shall be acquired’) and, therefore, the qualifying tenants are obliged to acquire ‘the interest of the tenant under any lease which is superior to the lease held by a qualifying tenant of a flat contained in the relevant premises’ (section 2(2)).
4.13 The wording of section 2(1)(b) of the 1993 Act is permissive (‘shall be entitled’) and, therefore, the qualifying tenants may acquire property falling within section 2(3), which is in the following terms:
(3) Paragraph (b) of subsection (1) above applies to the interest of the tenant under any lease (not falling within subsection (2) above) under which the demised premises consist of or include—
(a) any common parts of the relevant premises, or
(b) any property falling within section 1(2)(a) which is to be acquired by virtue of that provision,
where the acquisition of that interest is reasonably necessary for the proper management or maintenance of those common parts, or (as the case may be) that property, on behalf of the tenants by whom the right to collective enfranchisement is exercised.
4.14...
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