Articles

How to add value to your property in an uncertain market

For many people knowing when to buy or sell a property is impossible to calculate. However, provided you own a Leasehold on a property, there may be a way to make a profitable investment all from the comfort of your front room!

How is this so?

You can do this through what is commonly known as collective enfranchisement. This is the process where subject to meeting criterion a number of leaseholders group together and buy the freehold of the building in which their flats are located from the landlord.

Why buy the freehold?

Apart from the long-term investment opportunities which may come your way from collectively owning the freehold, there are many day to day practical benefits that arise from collective enfranchisement.

Poor and often costly (mis-) management undertaken either by the landlord or its managing agents, a difficult and unresponsive landlord when dealing with requests for a lease term extension or consent to sell the property. Such problems as these have led to leaseholders collectively becoming their own landlord. As your own landlord you eliminate all the above problems and arrange and deal with any issues concerning the building. This can often lead to reduced service charge costs and the ability to "shop around" for the best quotes.

In our experience, before embarking upon and during the process of acquiring a freehold we have found that the following three tips are always essential to ensure that a coordinated, cost effective and time efficient transaction will ensue:-

A working committee

It is advisable that where there are several leaseholders pursuing the acquisition of a freehold interest that there is one liaison (or a working committee) that acts on behalf of and appraises the other leaseholders and instructs the advisors who are representing the leaseholders.  Having a liaison avoids duplication of work and therefore exposure to wasted costs.

Communication 

Obtain an email address and suitable contact information from each participating leaseholder so that they can each be kept up-to-date on developments and receive copy correspondence and enclosures. This will help to avoid any misunderstandings later on in the acquisition.

Finances

We suggest that an equal amount of money is collected from each participating leaseholder to serve as a fund to pay for common costs such as that of instructing your solicitor and a valuer.  How much each participating leaseholder is required to contribute, if it is not to be on an equal basis, can also be discussed.  You should also consider the preparation of a participation agreement, which can set out the financial contribution of each participating leaseholder, the basis upon which decision making is to be made and so forth.

Colman Coyle have for over ten years operated a specialist Enfranchisement department dealing not only with acquiring the freehold of a property, but also extending your lease, Right to Manage and offers of first refusal. Hema Anand, the Partner in charge of the Enfranchisement Department has years of expertise and experience in enfranchisement actions

For more information on the above or for advice on any other enfranchisement issues please contact Hema Anand on 020 7354 3000

Date: May 2010