Residential property Flashcards
Leasehold enfranchisement
Q: What is leasehold enfranchisement?
A: It’s the process where leaseholders of residential properties can extend their leases or buy the freehold.
Q: Why is leasehold enfranchisement described as “ever-contentious”?
A: Because it often involves disputes between leaseholders and landlords, especially over legal and valuation issues.
Q: What are leaseholders becoming increasingly aware of?
A: Their rights to enfranchisement and the need for expert legal and valuation advice.
Q: What aspect is often neglected in available guidance on leasehold enfranchisement?
A: The perspective of the valuer surveyor.
Q: Who are commonly instructed to advise on matters affecting long leases of residential property?
A: Surveyors, lawyers, and others involved in residential property.
Q: What is typically the first type of enfranchisement claim discussed?
A: Claims by flat owners for new leases.
Q: Why does the text start with flat owners’ claims for new leases?
A: Because these are the most common types of claims made.
Q: What follows the legal analysis in new lease claims?
A: A detailed examination of how the price payable is determined.
Q: Why is residential leasehold law considered complex?
A: Due to multiple statutes and numerous statutory amendments.
Q: What legislation governs house lease enfranchisement?
A: The Leasehold Reform Act 1967.
Q: Which Act covers flat leases?
A: Part I of the Leasehold Reform, Housing and Urban Development Act 1993.
Q: What do the Landlord and Tenant Acts 1985 and 1987 cover?
A: Other features of leasehold management.
Q: Which Act addresses occupation rights at the end of a long lease?
A: The Local Government and Housing Act 1989.
Q: Which tribunal now handles leasehold enfranchisement disputes in England since July 1, 2013?
A: The First-tier Tribunal (Property Chamber).
Q: When must an application be made to the Tribunal in enfranchisement or lease claims?
A: If the parties cannot agree on the premium, lease/transfer terms, or costs.
Q: Why might leaseholders want to acquire the freehold or extend their lease?
A: To gain greater control over their homes, especially as the lease gets shorter.
Q: How are many leases described, even if well-drafted?
A: Experience suggests many are poorly drafted.
Q: What do landlords need when facing a claim for enfranchisement or a lease extension?
A: Expert advice on procedure, pricing, and costs.
Q: What rights does the holder of a qualifying residential lease generally have?
A: The right to enfranchise and, in many cases, the right to a new lease.
Q: Is there usually a residence test for lease enfranchisement?
A: No, with very limited exceptions, there is no residence test.
Q: What is the minimum original lease term that typically qualifies for enfranchisement?
A: A lease originally granted for more than 21 years.
Q: Can qualifying leaseholders of houses acquire the freehold using the methods described in the 1987 Act?
A: No, these methods apply only to qualifying leaseholders of flats.
Q: What must a landlord do before disposing of an interest in a qualifying block of flats under the 1987 Act?
A: They must first offer it to the qualifying leaseholders.
Q: What defines a “qualifying block of flats” under the 1987 Act?
A: A block where non-residential use is 50% or less and there are at least two qualifying leases.
Q: What happens if a landlord fails to follow the proper procedure when disposing of a qualifying interest?
A: It’s an offence, and leaseholders have rights to acquire the transferred interest from the new landlord.
Q: Under what part of the 1987 Act can leaseholders apply to the court to acquire the freehold due to landlord default?
A: Part III of the Landlord and Tenant Act 1987.
Q: Why might acquisition under Part III of the 1987 Act be cheaper than under the 1993 Act?
A: No marriage value is payable, and court-awarded costs often favor leaseholders.
Q: What is the key difference in non-residential use limits between the 1993 and 1987 Acts?
A: The 1993 Act excludes buildings with over 25% non-residential use, while the 1987 Act allows up to 50%.
Q: What legislation regulates service charges in leasehold flats?
A: Landlord and Tenant Act 1985.
Q: What rights are given under Part II of the 1987 Act?
A: The right to apply for a manager to be appointed.
Q: What does Part 2 of the Commonhold and Leasehold Reform Act 2002 introduce?
A: A no-fault-based right to manage leasehold properties.
Q: What right may leaseholders have when a long lease expires after 15 January 1999?
A: The right to an assured tenancy under section 186 and Schedule 10 of the 1989 Act.
Q: What are the key conditions for an assured tenancy under the 1989 Act?
A: The leaseholder must live in the property as their only or principal home, and rent must be £25,000 or less.
Q: Are company leaseholders eligible for an assured tenancy?
A: No, only individuals qualify.
Q: What is the general rent limit for assured tenancies since the 2010 amendment?
A: £100,000, but this does not apply to tenancies under the 1989 Act.
Q: What is the definition of franchisement in general terms?
A: Franchisement means the granting of rights or privileges, often by a governing body or law.
Q: What does enfranchisement mean in the context of residential leasehold law?
A: It refers to the legal process where leaseholders gain rights to either extend their lease or purchase the freehold of their property.
Q: How is the term franchisement different from enfranchisement in property law?
A: “Franchisement” is a broader term, while “enfranchisement” specifically refers to leaseholders acquiring additional rights over their property.
Q: What is the origin of the word franchisement?
A: It derives from Old French franchise, meaning freedom or privilege, and from Latin francus, meaning free.
Q: How is enfranchisement linked to leasehold reform?
A: It gives qualifying leaseholders legal rights to gain control over their homes by acquiring the freehold or extending the lease.
Q: What landmark legislation first gave leaseholders of houses the right to buy the freehold?
A: The Leasehold Reform Act 1967.
Q: What two key rights did the Leasehold Reform Act 1967 grant to qualifying leaseholders of houses?
A: The right to purchase the freehold and the right to an extended lease 50 years longer than the current term.
Q: Was the Leasehold Reform Act 1967 controversial?
A: Yes, it was controversial during both its parliamentary passage and its later implementation.
Q: What was the case that challenged the Leasehold Reform Act 1967 in the European Court of Human Rights?
A: James v United Kingdom (1986) 8 EHRR 123.
Q: What was the landlord’s argument in James v UK?
A: That the Act violated Article 6 of the European Convention on Human Rights by allowing compulsory acquisition of freehold property.
Q: What did the European Court of Human Rights decide in James v UK?
A: That national legislatures have a wide margin of discretion to address defined social needs, and the Act was upheld.
Q: What social need did the Leasehold Reform Act 1967 aim to address?
A: To give rights to residential leaseholders of houses whose leases were ending and who otherwise had no right to remain.
Q: Did the original 1967 Act apply to all leasehold houses?
A: No, it applied only to houses of lower value (based on former rateable values), excluding higher-value dwellings.
Q: What types of amendments have been made to the Leasehold Reform Act 1967?
A: Both technical and substantial amendments, including changes to valuation and eligibility criteria.
Q: What did the Housing Act 1969 amend in the Leasehold Reform Act 1967?
A: It made technical changes to the valuation process.
Q: What major change did the Housing Act 1974 introduce?
A: It increased rateable value limits, allowing more houses to qualify for enfranchisement.
Q: What is an Estate Management Scheme (EMS) and what Act introduced it?
A: Introduced by the Housing Act 1974, EMS allows landlords to retain certain rights over enfranchised properties by registering a management scheme.
Q: How are improvements by the lessee treated in valuation after the amendments?
A: Any increase in value due to lessee improvements must be excluded from the enfranchisement price.
Q: What was the purpose of the Leasehold Reform Act 1979?
A: To prevent landlords from artificially inflating the price payable through a legal device upheld in Jones v Wrotham Park Settled Estates [1979].
Q: What key change did the Housing Act 1980 make to the 1967 Act?
A: It reduced the qualification period from five years to three years for enfranchisement.
Q: How did the 1980 Act affect shared ownership leases?
A: Certain shared ownership leases were excluded from the right to enfranchise.
Q: What were Leasehold Valuation Tribunals (LVTs) created for?
A: To resolve valuation disputes in enfranchisement cases, replacing the Lands Tribunal (now the First-tier Tribunal).
Q: What other changes were made regarding intermediate leases?
A: Amendments were made to how intermediate leases are valued during enfranchisement.
Q: What was the purpose of changing the definition of a long lease?
A: To combat avoidance schemes that were used to bypass the right to enfranchisement.
Q: What issue did the Housing and Planning Act 1986 address?
A: It closed a loophole that allowed lessees to purchase more cheaply by combining a lease extension with a freehold claim.
Q: What was reformulated in the 1986 amendments regarding shared ownership leases?
A: The statutory basis for excluding some shared ownership leases from enfranchisement.
Q: What major enfranchisement reform did the Leasehold Reform, Housing and Urban Development Act 1993 bring?
A: Removal of rateable value limits, bringing more house leaseholders into the enfranchisement scheme.
Q: What new rights did flat leaseholders gain under the 1993 Act?
A: The collective right to enfranchise and the individual right to a new lease.
Q: What change was made to valuation under the 1993 Act?
A: Landlords could claim additional compensation for losses like development value.
Q: What leases became newly eligible due to changes in the 1993 Act?
A: Leases ending on death or marriage, and those failing the low rent test due to structural issues.
Q: What leases were excluded from enfranchisement under the 1993 amendments?
A: Leases granted by charitable housing trusts and those transferred for public benefit.
Q: What new procedural right was given to landlords in 1993?
A: The ability to apply for an Estate Management Scheme (EMS) under simplified procedures.
Q: What major amendment did the Housing Act 1996 make to the low rent test?
A: It allowed leases failing the test to qualify if originally granted for more than 35 years.
Q: How were leases without a rateable value handled under the 1996 amendments?
A: They were brought into the enfranchisement scheme, if the lease failed the test only due to missing rateable value.
Q: What compensation right was introduced for landlords in 1996?
A: If a failed enfranchisement claim led to statutory or assured tenancy, landlords could claim lost rent.
Q: What tribunal gained power over costs disputes in enfranchisement cases?
A: The Leasehold Valuation Tribunal (LVT).
Q: What did the Commonhold and Leasehold Reform Act 2002 virtually repeal?
A: The residence condition, allowing investors to exercise enfranchisement rights.
Q: What new rights did leaseholders gain after lease extension under the 2002 Act?
A: Right to enfranchise and to an assured tenancy at the end of the extended lease.
Q: Where are applications relating to missing landlords now made after the 2002 Act?
A: The County Court, not the High Court.
Q: What did the Housing and Regeneration Act 2008 change about the low rent test?
A: It abolished the test except as a qualifying condition for extended lease claims.
Q: What change was made to shared ownership leases under the 2008 Act?
A: All landlords could grant them, and in protected areas, leaseholders might not be able to fully acquire equity.
Q: When did the amendments under the Housing and Regeneration Act 2008 come into effect?
A: 9 September 2009.
Q: What major change was introduced by the Leasehold and Freehold Reform Act 2024?
A: Removed the requirement to be a tenant for two years before making a claim.
Q: What major exclusion was removed by reforms to the 1967 Act?
A: The higher value exclusion, allowing all qualifying house leases to enfranchise.
Q: What two qualifying rules were simplified by the reforms?
A: Abolition of the low rent test and virtual repeal of the residence test.
Q: What valuation method applies to original 1967 qualifying leases?
A: Section 9(1) – based on site value.
Q: What valuation methods require payment of marriage value?
A: Sections 9(1A) and 9(1C).
Q: How is marriage value shared under the 2002 Act amendments?
A: Shared 50:50, unless the lease has more than 80 years, in which case marriage value is nil.
Q: Do newer qualifying leases automatically have the right to an extended lease?
A: No – the right applies only if original qualifying conditions are met.
Q: What is marriage value in leasehold enfranchisement?
A: It is the increase in property value when the leasehold and freehold interests are combined. Half of this increase is paid to the landlord if the lease has 80 years or fewer remaining.
Q: What is marriage value?
Marriage value is a term used in leasehold enfranchisement to describe the increase in the total value of the property that occurs when the leaseholder acquires the freehold (or extends the lease) and combines the two interests — the leasehold and the freehold — into one.
🔑 Key Points:
Why does value increase?
Because a property with a long lease or freehold is more valuable than the sum of its separate leasehold and freehold interests. Buyers prefer longer leases or full ownership.
Who pays marriage value?
The leaseholder pays half of this increase to the landlord, but only if the lease has 80 years or fewer remaining.
Over 80 years left?
If the lease has more than 80 years left, marriage value is zero (per 2002 reforms).
💡 Simple Example:
Imagine a flat:
Value with short lease: £200,000
Value of freehold alone: £30,000
Value when combined (after enfranchisement): £250,000
Marriage value = £250,000 − (£200,000 + £30,000) = £20,000
Leaseholder pays 50% = £10,000 to the landlord.
Q: What key rights were introduced under Part I of the Leasehold Reform, Housing and Urban Development Act 1993 for flat leaseholders?
A: The collective right to buy the freehold and the individual right to a new lease.
Q: What major changes did the Commonhold and Leasehold Reform Act 2002 make for flat lease enfranchisement?
A: It repealed the residence test, reduced the participation threshold from 66% to 50%, and increased non-residential floor area limit from 10% to 25%.
Q: What are the current conditions for a block of flats to qualify for collective enfranchisement?
A:
Non-residential parts must not exceed 25%
There must be at least two flats
At least 50% of leaseholders must participate
Q: What is a nominee purchaser in collective enfranchisement?
A: A company formed by participating leaseholders to acquire the freehold on their behalf.
Q: What is a participation agreement in collective enfranchisement?
A: An agreement between leaseholders covering cost contributions, adviser appointments, and other administrative matters related to enfranchisement.
Q: How is marriage value treated under the 2002 Act for flats?
A: 50:50 split between landlord and leaseholders unless the lease has more than 80 years left (then no marriage value is payable).
Q: What is hope value in the context of flat lease enfranchisement?
A: A value the landlord can claim for the potential future participation of non-participating leaseholders, based on the release of marriage value.
Q: When was the Leasehold and Freehold Reform Act 2024 passed?
A: On 24 May 2024.
Q: As of 7 February 2025, what is the status of the Leasehold and Freehold Reform Act 2024?
A: Only some provisions have been brought into force.
Q: What does the 2024 Act aim to prohibit?
A: The grant or assignment of certain new long residential leases of houses.
Q: What changes does the 2024 Act propose for enfranchisement valuation?
A: It proposes reforming the valuation process for lease extensions and freehold purchases.
Q: What two values are removed from enfranchisement premiums under the 2024 Act?
A: Marriage value and hope value.
Q: What is the proposed cap on ground rent treatment in enfranchisement valuation?
A: 0.1% of the freehold value.
Q: What will be prescribed under the 2024 Act to aid leaseholders in calculating enfranchisement costs?
A: Capitalisation and deferment rates.
Q: What is the new lease extension term for both flats and houses under the 2024 Act?
A: 990 years, renewable as often as desired.
Q: What redevelopment break rights are included in the 2024 Act?
A: Breaks can occur during the last 12 months of the original lease, or the last 5 years of each 90-year period of an extension.
Q: What option does the 2024 Act give to leaseholders with long leases regarding ground rent?
A: The right to buy out the ground rent without having to extend the lease.
Q: What is meant by the “tone of value” in property valuation?
A: It refers to the range of property values within a neighbourhood and where the subject property fits within that range.
How is the valuation of new built homes regulated?
There is Valuation of individual new-build homes, 3rd edition, RICS professional standard (May 2023).
This document was reissued in May 2023 as a professional standard. It had previously been published in December 2019 as a guidance note. No material changes have been made to the document
What is the difference between the new professional standard and the guidance released in March 2021 for the valuation of multi-storey, multi-occupancy residential buildings with cladding?
This new professional standard is complimentary to the existing guidance effective from March 2021 and is intended to help valuers undertaking valuations for secured lending purposes on domestic residential flats, within residential blocks of 5 or more storeys or 11 metres or more in height.
It takes into account the effect of government remediation schemes (in England and Wales only) and their impact on the value of properties.
The previous guidance was produced to help valuers understand when an EWS1 form is required due to visible cladding.
Lenders will confirm which valuation approach they wish to follow with the valuer - both pieces of guidance are necessary, but their areas of focus are different.
Why does the professional Standard for the Valuation approach for properties in multi-storey, multi-occupancy residential buildings with cladding, 2nd edition focus on blocks in England and Wales, of 11 metres or more tall?
While it is possible that the principles of this standard can be applied to buildings under 11m, this standard focuses on blocks which have agreed funding and a timeline for remediation through the English and Welsh Government’s remediation schemes, for example, the Welsh Building Safety Fund and the Building Safety Fund, which currently only applies to buildings 18m+ or 7 storeys or more in England.
