Collective Enfranchisement: Criteria
Both the building and the leaseholders must meet certain criteria before the process of collective enfranchisement is started.
The building must be self contained with at least two flats, at least 50% of all flats in the building must participate (if there are only two flats in the building then both must participate), a maximum of 25% of internal floor space for non-residential use is required and it must not be a building within a cathedral precinct, a National Trust or Crown property.
The qualifying criteria for leaseholders is that they:
- Own a lease that when granted had an unexpired term of at least 21 years;
- A lease with an unexpired term of less than 21 years but with a clause providing a right of perpetual renewal or;
- The communication of a long lease under the Local Government Housing Act 1989 following the expiry of the original term or;
- A shared ownership lease where the leaseholders share is 100%;
- The leaseholder owns a maximum of 2 flats in the building (although you can still qualify for a lease renewal).
Even if a leaseholder satisfies one of the above conditions there are certain exceptions where they will still not qualify where they:
- Have a landlord who is a charitable housing trust and the flat is purchased as part of the charity’s functions;
- Own more than 2 flats in the building;
- Own a business or a commercial lease.
VESTING ORDERS IF THE FREEHOLDER IS ABSENT
Qualifying tenants can apply to the county court for what’s called a ‘vesting order’ under s26(1) of the 1993 Act. This removes the need to serve an Initial Notice under s13 on some if not all of the landlords. If there is a head landlord present but the freeholder is missing, the court can order that the head landlord take on the role of Reversioner and deal with the claim in the usual way.
If the vesting order is applied for, s26(5) of the Act allows the court to issue directions to give effect to rights and obligations including directions adapting or discarding any of the requirements of the Act. The court will make an order vesting the interest to be acquired in the body set up by the qualifying tenants to collectively enfranchise (i.e. the nominee purchaser). Furthermore, the terms of acquisition must be agreed by the LVT.
The next stage of the process is that of how much the process will cost.