The leaseholders serve the freeholder with the Section 13 Notice under the Leasehold Reform, Housing and Urban Development Act 1993, also known as an Initial Notice, to exercise their collective enfranchisement rights (buying your freehold). This is distinct from the Section 13 notice that a landlord serves on a tenant to raise the rent.
For further questions related to Lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.
A Section 21 Counter-Notice must be served on the freeholder in response to the Section 13 notice.
What steps should you take before serving the Section 13 Notice?
- Check your eligibility
- RICS Freehold valuation – you need to value the freehold to:
- Know whether the participating leaseholders can afford to buy the freehold as a group;
- ○ limit the risk of serving an inaccurate premium in the initial notice, which, if disputed by the landlord, can cause a delay in the process and additional negotiation costs with the freeholder.
- Select your nominee purchaser(s).
- Inform your freeholder or (if applicable) the intermediary landlord of your plans and confirm that they are not absent. NB This also ensures that you serve notice on the correct person/entity. If you don’t, your notification may be rendered null and void.
Choosing the Nominee Purchaser
If the process is completed, the Nominee Purchaser, as indicated in the Initial Notice, receives the freehold and becomes the new landlord.
You should decide who this is early on because they will become the building’s manager. If you opt to form a corporation, it must be formed and incorporated before serving your section 13 notice.
You and the other participating tenants can choose who the Nominee Purchaser is. They can, for example, be:
- a person;
- one of the tenants;
- a corporate person/external corporation;
- a trust; or
- a company formed for the tenants. – This is the most frequent option since it allows a group of leaseholders to run the company and share the duty of preserving the freehold and adhering to the requirements of the freeholder.
What’s in Section 13 Initial Notice?
- Full names and addresses of:
- the eligible tenants who are serving the Section 13 Initial Notice;
- ALL qualifying tenants;
- the landlord/freeholder and any intermediary landlords;
- and the Nominee Purchaser/s
- Details of the property for which you intend to purchase the freehold, including a plan and any relevant descriptions;
- Details of any further freehold interests you desire to purchase;
- Rights to be required – this includes things like vehicular access, rights of way, and access to drainage; all of these things should be fully specified and marked using plan diagrams.
- The basis for your claim. This is where you must state the facts that make your case eligible, such as the fact that 2/3 of the apartments are rented by qualifying tenants, and so on.
- Details of all leaseholds to be purchased ;
- Specifics on any mandatory leasebacks. This refers to any leaseholders who have the right to continue their leases, such as those with secure tenancies, and whose leases must be honoured by the Nominee Purchaser once the procedure is completed – the current freeholder may have an obligatory leaseback.
- The suggested price for the freehold and any other interest/s that the qualifying purchasers seek to purchase;
- The date by which a counter-notice must be served (at least two months after the Section 13 Initial Notice but no more than six months after); and
- At the end of the notification, the Nominee Purchaser/s and ALL of the qualified tenants must sign.
First, ensure that you and your fellow leaseholders are entitled to purchase your freehold.
The collective enfranchisement procedure is extensive, and there are various conditions to meet before serving a Section 13 Initial Notice under the Leasehold Reform, Housing, and Urban Development Act of 1993.
You should also keep in mind that you must select a Nominee Purchaser to represent the interests of all participating eligible freeholders, which is essential for the Section 13 Notice to be served.
Serving a Section 13 Notice correctly is critical!
A conveyancing solicitor who has worked with leaseholders who want to buy their freeholds understands that a Section 13 Notice issued on a landlord/freeholder must be complete and error-free.
If your landlord/freeholder identifies flaws in the notice, they can seek to have it dismissed, which means that not only will your application be halted, but you will also be barred from making another application for 12 months.
What happens next?
Assuming they do serve this notice, you may reasonably expect that if you’ve engaged the proper professionals, the counter-notice will usually agree to your claim, and you can then focus on agreeing the premium, compensation, and final conveyancing required for the process to be complete.
- After your solicitor has issued the notice, you must pay your landlord’s reasonable fees, which typically include the cost of their freehold appraisal and legal representation
- If your landlord does not agree with your claim, they must explain why in their counter-notice, and you or they have the right to take the matter to the First-tier Tribunal within at least 2 months but no more than 6 months (Property Chamber). You must pay a small fee to use this court, but after that, your landlord must pay all of their own fees, which frequently convinces the freeholder to become a bit more realistic with the premium they are seeking.
LeaseholdValuation specializes in leasehold valuations, lease extensions, and enfranchisement. Have a quick 10-minute free consultation with one of our RICS experts.