Collective enfranchisement is the right under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) Part I for qualifying leaseholders in a block of flats to purchase the freehold of their building collectively through a Right to Enfranchise (RTE) company. If the qualifying criteria are met and the procedural rules are followed, the freeholder has no right to refuse — they can only negotiate the price or challenge whether the building qualifies. The Leasehold and Freehold Reform Act 2024 (LFRA 2024) received Royal Assent in May 2024 and introduces significant changes, though most provisions require commencement orders before taking effect.
Qualifying Buildings
Not all blocks of flats qualify for collective enfranchisement. The building must: (1) be a self-contained building or part of a building that is structurally detachable; (2) contain at least two flats held by qualifying tenants; (3) not exceed 25% non-residential floor area (offices, shops, etc.) — though LFRA 2024 will raise this threshold to allow more mixed-use buildings to qualify once commenced; (4) not be a converted house with four or fewer units where the freeholder occupies one flat as their only or principal residence (the resident landlord exception — very narrowly applied in practice). National Park or Crown Estate properties may have specific exclusions.
- Structural self-containment: building or a physically detachable part of a building
- Minimum two qualifying flats: must have at least two long leaseholders participating
- 25% non-residential threshold: commercial space must not exceed 25% of internal floor area (LFRA 2024 will raise this)
- Resident landlord exception: freeholder must live in one flat as only or principal home AND building must have 4 or fewer flats — narrow exception
- Converted house exclusion: four flats or fewer in a converted house where resident landlord exception applies
Qualifying Leaseholders and Participation Requirements
A qualifying tenant is a leaseholder holding a long lease — originally granted for more than 21 years. At least two-thirds of all flats in the building must be held by qualifying tenants (long leaseholders). Of those qualifying tenants, at least 50% must participate in the collective enfranchisement claim. So in a building with 10 flats, at least 7 must be held by long leaseholders, and at least 5 of those must join the claim. A leaseholder cannot participate if they hold more than 2 flats in the building. Under LFRA 2024, the 2-year ownership requirement (which previously prevented new leaseholders from immediately enfranchising) has been removed — leaseholders can participate from day one of ownership once the provision is commenced.
- Long lease: originally granted for a term exceeding 21 years — the qualifying threshold
- Two-thirds qualifying test: at least 2/3 of all flats must be held by qualifying (long lease) tenants
- 50% participation: at least half of all qualifying tenants must join the claim
- 2-flat limit: a qualifying tenant who holds more than 2 flats in the same building cannot participate
- LFRA 2024: 2-year ownership requirement abolished (not yet commenced) — new owners can immediately participate
The Enfranchisement Procedure
Participating leaseholders form or nominate a Right to Enfranchise (RTE) company and serve an initial notice on the freeholder. The initial notice must: identify the building; state the purchase price the participating leaseholders are offering; specify the proposed terms of acquisition; include details of each participating leaseholder and their flat. The freeholder has 2 months to serve a counter-notice either admitting the right to enfranchise (and accepting or proposing different terms) or disputing the right. If the freeholder disputes the right, the leaseholders must apply to the County Court within 2 months to have the right established. Once the right is admitted or established, the parties have 6 months to agree terms. If no agreement, either party can apply to the First-tier Tribunal (Property Chamber) for determination.
- RTE company: incorporated by the participating leaseholders — the vehicle for the claim and the new freehold owner
- Initial notice: served on freeholder; specifies purchase price; must cover all flats in the building
- Counter-notice: freeholder must respond within 2 months — admit or dispute the right
- County Court: if freeholder disputes the right, leaseholders apply to court within 2 months
- FTT valuation: if price not agreed within 6 months of counter-notice, FTT determines the purchase price
Price — Valuation and LFRA 2024 Changes
The purchase price under the existing LRHUDA 1993 regime is based on a complex formula including: the capitalised ground rent income (applying a capitalisation rate — previously set by market evidence, now to be prescribed by the Secretary of State under LFRA 2024); the deferment value (freeholder's reversionary interest — the right to receive the freehold back at lease expiry, discounted at a deferment rate set by Sportelli at 5% for houses and 5.25% for flats, also to be prescribed under LFRA 2024); and marriage value — the additional value created by combining the freehold and leasehold interest, shared 50/50 where the unexpired lease term is under 80 years. LFRA 2024 abolishes marriage value on enfranchisement claims, removing the significant premium for short leases — the most important cost-reduction for leaseholders once commenced.
- Capitalised ground rent: ground rent income capitalised at a rate (to be prescribed under LFRA 2024)
- Deferment value: freeholder's reversionary interest; Sportelli deferment rate 5.25% for flats — to be prescribed
- Marriage value: abolished under LFRA 2024 — currently applies where lease unexpired term <80 years (50% split)
- Hope value: market premium above formula value — addressed by LFRA 2024 prescribed rates
- LFRA 2024 commencement: most valuation provisions require commencement order — not in force June 2026; take specialist advice on current and forthcoming position
Implications for Freehold Landlords
A freehold landlord who receives a valid initial notice cannot refuse to sell. They can: serve a counter-notice disputing the right (if they have genuine grounds); negotiate the purchase price; challenge the valuation at the FTT if no agreement is reached. The freeholder receives the market value of the freehold as determined by the LRHUDA 1993 formula — which compensates for the loss of ground rent income and the reversionary value. They do not receive compensation for the loss of management fees or the wider portfolio impact. Once leaseholders form an RTE company and take title, the freeholder loses all management rights, ground rent income, and future reversion. Landlords who own the freehold of a block of flats should take specialist advice on the likely enfranchisement price of their building and factor this into portfolio valuations.
- Cannot refuse a valid claim: no discretion to decline once qualifying conditions are met
- Counter-notice options: dispute qualification; propose different price; negotiate terms
- FTT: determines price if no agreement — costs of FTT proceedings borne by each party (unless unreasonable conduct)
- Freeholder's costs: costs of processing a valid claim are payable by the leaseholders (LRHUDA 1993 s.33)
- Abandonment: leaseholders can abandon the claim before completion — they bear the freeholder's costs if they do
- Leaseback: freeholder can require leaseback of any flat they occupy (or non-residential units) — they become a qualifying tenant in the new structure
Frequently asked questions
Can I refuse collective enfranchisement as a freeholder?+
No — if the qualifying conditions are met and the correct procedure is followed, the freeholder cannot refuse to sell. You can serve a counter-notice disputing whether the building qualifies, negotiate the purchase price, or apply to the FTT if no price agreement is reached, but you cannot simply decline a valid claim.
What is the LFRA 2024 and how does it affect enfranchisement?+
The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024. Its most significant change is the abolition of marriage value on enfranchisement claims — removing the premium currently paid where a lease has under 80 years unexpired. It also abolishes the 2-year ownership requirement and prescribes deferment and capitalisation rates. Most provisions require commencement orders and are not yet in force.
How is the collective enfranchisement price calculated?+
Under the current LRHUDA 1993 formula: capitalised ground rent income + deferment value (reversionary interest discounted at 5.25% for flats) + marriage value (where lease under 80 years — shared 50/50 between leaseholders and freeholder). LFRA 2024 abolishes marriage value and prescribes the capitalisation and deferment rates, but these provisions are not yet in force.
Do leaseholders have to pay the freeholder's legal costs?+
Yes — LRHUDA 1993 s.33 provides that the freeholder's reasonable legal and valuation costs of processing a valid enfranchisement claim are payable by the leaseholders. However, if leaseholders abandon the claim, they are also liable for the freeholder's costs incurred up to that point.
What proportion of leaseholders need to participate in a collective enfranchisement?+
At least two-thirds of all flats in the building must be held by qualifying tenants (long leaseholders), and at least 50% of those qualifying tenants must join the claim. In a 10-flat building, at least 7 must be long leaseholders and at least 5 must participate.