What is leasehold enfranchisement and how does it work?

Full answer

Leasehold enfranchisement covers the statutory rights of leaseholders in England and Wales to either extend their lease or acquire the freehold, reducing dependence on a landlord and removing or limiting ground rent. There are three main routes. First, lease extension for a flat: an eligible leaseholder can extend their lease (historically by 90 years on top of the unexpired term, with ground rent reduced to a peppercorn). Second, collective enfranchisement: the leaseholders in a block can club together to buy the freehold of the building. Third, freehold purchase for a house: most leasehold house owners can buy the freehold. The cost is a 'premium' paid to the freeholder, set by a statutory valuation. The premium broadly reflects the value the freeholder loses - the lost ground rent income and the 'reversion' (getting the property back at lease end) - and historically a share of 'marriage value' where the lease is short. The shorter the lease, the higher the premium, and crossing below 80 years unexpired has traditionally increased cost sharply. The exact valuation depends on lease length, property value and ground rent, so there is no single figure - a specialist enfranchisement surveyor produces the calculation, and disputes can go to the First-tier Tribunal. Who it affects: owners of leasehold flats and houses. Leasehold reform legislation has been changing this area, aiming to make extensions longer and cheaper and to simplify the process, so confirm the current rules before proceeding rather than assuming older terms still apply. Budget for more than the premium: you typically pay your own legal and valuation fees and, under the older regime, a contribution to the freeholder's reasonable costs. A shorter lease can also affect mortgageability and resale value, so extending early is often financially sensible. Model your borrowing or any price impact with a mortgage calculator, and take specialist legal advice.

Try the calculator