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Do you own a leasehold apartment? Have you thought of purchasing the freehold title to your property? If so, then a collective enfranchisement company could be for you.

Under recent legislation, namely the Leasehold reform Act, a group of leaseholders are entitled to apply to the freeholder of the building (landlord), to purchase the freehold providing certain criteria is met.

A collective enfranchisement company holds the freehold on behalf of the shareholders or members of the company.

The reasons for acquiring the freehold to your property are namely:

• Removal of ground rent.
• Enables the residents that participate, to grant long leases.
• Enables you to take over the control of the management of the building.
• Deals with the lack of an effective management structure due to an absentee landlord.
• Perceived psychological benefit of being part of a tenant owned property.
• Once the freehold is acquired via a collective enfranchisement company, the resale of an apartment is more attractive to a potential purchaser than a leasehold property with a short lease.

The Specific criteria that is required to proceed with the application is as follows:

• The number of leaseholders who wish to participate must represent at least 50% of the number of flats in the building.
• The leaseholders who wish to participate must qualify by holding leases that were originally granted for more than 21 years. No minimum ownership period applies.
• The building must have no more than 25% none residential use.

The cost of acquiring the freehold from the landlord is based on a valuation using complex formulae. They are based on various factors such as amount and level of ground rents, frequency of review, length of unexpired terms of the leases and in cases where participating tenants have leases more than eighty years unexpired, it would be necessary to pay a marriage value.

Should the freeholder and leaseholders be unable to agree a price, the freeholder or leaseholder may make an application to the Leasehold Valuation Tribunal who will determine a price payable.

How to proceed?

Should you feel that purchasing the freehold of your property is the right way forward and you have likeminded neighbours meeting the specific criteria then the appointment of suitably specialised solicitor and surveyor is a necessity.

The Association of Leasehold Enfranchisement Practitioners is a specialist organisation with registered members authorised to practise in this area. A list of members can be found at the above link.

Once you have incorporated a Collective Enfranchisement Company, and appointed members or shareholders, directors and a company secretary, be aware that the rules for these companies are the same as any other Limited company.

Strict Companies House filing penalties apply for the submission of accounts and annual returns. Prosecution for directors is possible should the annual paperwork not be completed in a timely manner.

Collective Enfranchisement companies do however qualify for exemption from submission of a company tax return from HMRC, subject to the appropriate forms being completed.

How Warr & Co can help…

• We are a firm of Chartered Accountants and Independent Financial Advisers with specific experience in the field of Flat management and Collective Enfranchisement accounting.

We can:

• Complete the annual Companies House return on your behalf.

• Complete the annual accounts and submit to the authorities.

• Provide you with the necessary annual reminders to ensure you are always up to date with your compliance.

• Assist with personal tax return completion.

• Assist with raising finance to acquire the freehold title.

How we do it:

We pride ourselves on using modern forms of communication and investment in IT, helping us keep our costs low, passing our savings on to you.

We email the majority of our correspondence including annual accounts.

We answer all queries within 48 hours.

We provide competitive fixed annual fees.

Should you wish to discuss this article or for further information please email us or contact Pete Edwards on 01614776789.

Date of Article: 18th November 2008