Why bother in the first place?

Since the Leasehold Reform, Housing and Urban Development Act 1993, leaseholder owners of flats in certain categories of building have been able to “collectively enfranchise” and force the freeholder to convey the freehold of the building to a nominee purchaser, normally a company formed by the leaseholders for this purpose. One of the (many) weaknesses in the 1993 Act is that it is possible for an otherwise qualifying leaseholder to be excluded from the enfranchisement process by other leaseholders.

The Commonhold and Leasehold Reform Act 2002 was supposed to prevent this problem by creating the “Right to Enfranchise” company. In outline, any attempt to enfranchise would have to be through the mechanism of an RTE company, with all leaseholders given the opportunity to join the process.

However, the RTE company provisions as provided for under the 2002 Act have never been brought into force. The Government was concerned that there would be practical difficulties in determining disputes between members (or potential members) of the RTE company and that it would be inappropriate for the company to resolve such matters itself via a general meeting; secondly, there was nothing to stop discrimination between members (or potential members) of the company in the distribution of the costs of the RTE company and, finally, potential members were entitled to join at any stage up to the purchase, thus making it almost impossible to determine the purchase price in advance.

The Government has now started a consultation process, to close on 3 August 2009, to decide how best to deal with these problems. The consultation paper is here and the ministerial statement is here. At the moment, the Government is minded to deal with these problems by repealing the RTE parts of the 2002 Act and starting again. .

About J

J is a barrister in London. He loves service charges and all things leasehold law related. He also likes beating rogue landlords and mortgage companies.
Posted in Housing law - All, Leasehold and shared ownership and tagged , .

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