Chartered Surveyors specialising in leasehold enfranchisement since 1978

 

Boston Radford is a practice of Chartered Surveyors which specialises in the negotiation of statutory lease extensions and enfranchisement claims. With a combined experience of more than 100 years, we are one of the most experienced practices specialising in leasehold enfranchisement in Prime Central London.

CHARLES BOSTON

SIMON RADFORD

DAVID RADFORD

ENFRANCHISING HOUSES

The legislation derives from the Leasehold Reform Act 1967, which was the first piece of legislation to give leaseholders the right to enfranchise. The legislation was enacted under a Labour government and its stated aim was “to enable tenants of houses held on long leases at low rents to acquire the freehold or an extended lease”. The houses covered by this legislation were limited to those below a specific rateable value (in the days when residential property had a rateable value) and it did nothing to help owners of flats. Since 1967 this legislation has been modified by over a dozen Acts of Parliament, a multitude of statutory instruments and several hundred landmark decisions established both in the law courts and the tribunals. Today all houses, however valuable, will qualify providing only that a) They meet the necessary definition of a house contained in section 2 of the Act and as reviewed by the Supreme Court in several landmark cases; b) The original term of the lease exceeds 21 years; and c) The claimant has owned the lease for at least two years and has not withdrawn an earlier claim within the last twelve months. However, although the scope of qualification has been widened to include virtually all houses, there are still several different valuation bases that remain which are dependent upon historic rateable or rental values. It is essential to establish the correct valuation basis as these have a very significant effect on the enfranchisement price.

LEASE EXTENSIONS

A leaseholder’s right to acquire their freehold was given to owners of houses under the Leasehold Reform Act 1967. It was not until the Leasehold Reform, Housing and Urban Development Act 1993 that the owners of flats and maisonettes were given what were considered to be equivalent rights. The rights conveyed by the 1993 Act are not actually equivalent to enfranchisement for two reasons: first, the law only allows a tenant to extend their lease, so they will remain bound by the covenants of the previous lease (except for the payment of ground rent) and secondly, that extension is only an additional ninety years so in many cases they will have not entirely extinguished the diminishing aspect of their investment. In most cases a ninety year extension will result in that flat having close to its maximum value, particularly as the new lease cannot contain an obligation to pay any ground rent, but it is not enfranchisement. The only way for a tenant to acquire a share of the freehold is to participate in a collective enfranchisement claim. Unlike claims under the 1967 Act, it is necessary to propose a price in the claim notice. That has given rise to several referrals to the courts on what constitutes a reasonable proposal. The current view is that it should be based on evidence, but it does not have to be a figure that you would expect a landlord to agree. There are two reasons for a tenant to propose the lowest possible figure: first, there is an advantage in keeping the figure as low as possible to ensure a healthy margin for negotiation and, secondly, the statutory deposit with these claims is 10% of whatever price is proposed. Unlike 1967 Act claims, there are strict timetables regarding an application to the valuation tribunal and these can create pressure on the negotiation. There have been literally hundreds of tribunal and law court decisions relating to lease extension claims which have transpired to be much more complicated than was first envisaged.

COLLECTIVE ENFRANCHISEMENT

Collective enfranchisement is where a group of leaseholders club together to acquire the freehold of their block. It was introduced in the Leasehold Reform, Housing and Urban Development Act 1993 and has proved fairly successful. For any collective enfranchisement to succeed, you need a fair amount of coordination between the lessees and somebody to manage the process. We work in close contact with residents’ associations and their chosen solicitor in sorting out who is going to participate, who is going to pay for the reversionary value of those leases owned by the non-participating lessees. The Act requires that at least 50% of the lessees need to participate and there lies the first difficulty. It is very common, particularly in a large block, to have a number of non-participating and this will frustrate a claim unless either the participating lessees are agreeable to making that further investment or some third party investor is found. As with individual lease extensions, it is necessary to propose a price, but unlike individual lease extensions it is not necessary to provide a statutory deposit. We were involved in some of the earliest collective enfranchisements but we have also been involved in claims which endured for many years before the section 13 notice was eventually served. The secret to all collective enfranchisement claims is to have one of the lessees, ideally a residents’ association chairman, acting as a co-ordinator. Where there is uncertainty amongst the qualifying lessees and the leases are relatively short, it may be sensible for those who wish to get on with it to make an individual claim for a lease extension. That way, if the collective claim should flounder, they will be in a secure position and if it should progress after all, their contribution will be minimal.

FORMAL VALUATIONS

As chartered surveyors we are qualified to provide valuations for any type of residential property. Apart from statutory valuations relating to the 1967 and 1993 Acts, we also provide valuations for the following purposes: Annual Tax on Enveloped Dwellings (ATED) Capital Gains Tax (CGT) Corporation Tax (CT) Inheritance Tax (IT) Balance sheet purposes Divorce proceedings

We subscribe to the database Lonres.com, which provides evidence on more than 90% of all residential sales throughout central London going back as far as 1984. In order to ensure that we are not unaware of any particular sale, we also consider evidence directly from the Land Registry.

Estate agents’ particulars very seldom provide sufficient information to analyse a sale properly. They may, for example, state “lease of approximately 42 years” or simply “leasehold”. We will always investigate to determine the exact unexpired term on the date of sale, the ground rent payable at the time, whether there is any provision for a review of that ground rent and whether there are any other covenants of an unduly onerous nature.

PROFESSIONAL CONSULTANCY

We are consulted on a number of interrelated issues, the most common being from clients looking to purchase short leases. Before they can know what to bid to acquire a leasehold property, they need to know approximately what it may cost to extend that lease (in the case of a flat) or to acquire the freehold (in the case of a house). While the client is at the stage of formulating a bid to purchase the property, it is understandable that they may be reluctant to incur the cost of a full valuation. In such circumstances, provided we are given reliable details relating to the lease, the dimensions of the property, particularly floor plans, and any licences relating to alterations, it is usually possible to prepare an initial opinion on a “desk-top” basis, and this can be carried out at a much reduced fee. If the client should proceed to acquire the lease, then any fees already incurred may be absorbed in the normal fee for negotiating a claim. We are also regularly consulted as expert witnesses in cases of professional negligence and even criminal matters, such as mortgage fraud. In the first instance we prepare a report including detailed analysis of comparable evidence, reference to any relevant case authorities and all statutory provisions. In most cases once we have provided this written evidence the matter is usually concluded without the need for further litigation. However, if the matter is referred to a court of law, we have considerable experience in giving evidence as expert witnesses before a hearing. Most of this experience derives from our core activity in representing clients who have made claims under the 1967 or 1993 Acts. In the vast majority of cases we achieve a negotiated settlement without the need for a hearing, but where this is not possible, we have given evidence as expert witnesses on many occasions before the First Tier Tribunal and the Upper Tribunal (Lands Chamber).