Estate Management & Chartered Surveyors

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Enfranchisement VERSUS Lease Extension

Comparing the fors and against

Please note that information provided on this site is given as a guide only and is not intended as a legal interpretation, the comments made are intended to be as brief and as clear as possible but you should always seek advice from a Solicitor before taking any action.
Enfranchisement
Lease Extension
The Tenants have to set up an RTE Company before starting the process No Company is necessary for a Lease Extension.
There is one total of professional costs shared between participating tenants

The total costs may be similar but each qualifying tenant is responsible for all of the costs.
If several tenants progress a Lease extension at the same time using the same professionals, there may be some savings.

Initially only one property title is transfered by the Solicitors
The Tenants RTE company acquires the freehold interest
There are likely to be additional legal costs later when Lease extensions are granted to participating tenants.

 Each tenant needs a Solicitor to acquire the variation of the exisiting Lease see FAQ

A minimum of 50% of qualifying tenants have to participate in enfranchisement.
Those who participate become shareholders of an RTE Company that purchases the Landlords interest.
The RTE Company acquires the freehold interest of those leaseholders who do not participate.

 Each qualifying tenant only purchases an extension of their existing Lease see FAQ
By acquiring the freehold, the participating tenants also usually acquire the Landlords management rights including the right to nominate the insurer. A Lease extension gives no addition rights other than an increased term and reduced ground rent.

It can be difficult to gather sufficient interest to achieve the 50% participation needed initially.
To get started sufficient monies have to be generated to pay for initial professional costs.
Once the process gets going more people will probably join in.

The Leaseholder is not reliant on any other tenant to progress the Extension.
Each Leaseholder has to raise their own funds to set the process in motion.
At the outset, all Tenants have to be offered the opportunity to participate. No consultation is necessary when deciding whether to go for a Lease extension but it is economic to try and join with other tenants to proceed at the same time.
It is typically impossible to properly estimate all the costs but everyone has to make a decision at an early stage.

Tenants face the same cost uncertainty whichever route they decide on
There is no limit to the length of lease that participating tenants can grant themselves once they collectively own the freehold as shareholders of the RTE Company.

Statute specifies the length of lease and ground rent that must be granted upon making an individual application to the Tribunal

If you do not participate in an ongoing enfranchisement then you have no benefit and will eventually need to negotiate with the RTE Company to purchase a lease extension.

Enfranchisement does not automatically provide an extended Lease
A mortgage lender may still require an extended Lease document even if one participates in the enfranchisement.
A mortgage lender requires a fixed term to be remaining after the projected end of a new mortgage.

 The value of a Leasehold interest begins to reduce after the term passes 80 years remaining.
A mortgage lender requires a fixed term to be remaining after the projected end of a new mortgage.

Decisions about the enfranchisement process are made collectively
Consequences (such as costs and time) are shared

 All decisions are yours.
SWA Estate Management & Chartered Surveyors


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