Collective Enfranchisement: Served With a Section 13 Notice
Leaseholders are claiming your freehold collectively. Qualification is worth testing, and the valuation is considerably more involved than a lease extension.
Your reasonable costs are usually recoverable*
*Limited to investigating title, valuation for the claim and conveyancing. Negotiation costs are not recoverable, and at tribunal each side bears its own.
In short
What is a Section 13 notice?
A Section 13 notice is a claim by qualifying leaseholders to buy the freehold of their building collectively, under the Leasehold Reform, Housing and Urban Development Act 1993. It is known as collective enfranchisement.
Can a freeholder resist a collective enfranchisement claim?
Yes, where the qualifying conditions are not met. The building must be self-contained with no more than 25 per cent of the floor area in non-residential use, and at least half of the flats must participate. Defective notices can also be challenged.
What is a leaseback?
A leaseback is a lease of a non-participating flat granted back to the freeholder on completion, allowing the freeholder to retain an income-producing interest in the building. Freeholders may be entitled to require leasebacks, which reduces the price payable.
Who pays the freeholder’s costs?
Under the current law the participating leaseholders are liable for the freeholder’s reasonable valuation and legal costs in connection with the claim.
Qualification is worth testing
Collective claims fail on technical grounds more often than leaseholders expect. Testing qualification is the first thing we do, because a defective claim changes everything that follows.
01
The building must qualify
Self-contained, with no more than a quarter of the internal floor area in non-residential use. Buildings with substantial commercial content may fall outside the right altogether.
The resident landlord exemption
A building is excluded from the right where it is not a purpose-built block, contains four or fewer units, and the freeholder or an adult member of their family has occupied a flat in it as their only or principal home for the last twelve months. The freeholder must also have owned the freehold since before the conversion into flats.
Where it applies the claim fails entirely, so it is among the first things to check on a smaller converted building. The twelve-month residence requirement is strict, and each limb must be satisfied.
02
The participants must qualify
At least half the flats in the building must participate, held by qualifying tenants on long leases.
03
The notice must be valid
Prescribed content, the correct parties, proper service and a proposed price that is not merely nominal.
How the freehold is valued
More involved than a lease extension, because the valuation covers every flat in the building rather than one.
The value of the reversion
Assessed across every flat, participating or not, at the valuation date.
Ground rent income
Capitalised across the whole building over the remaining terms.
Marriage value
For participating flats with unexpired terms below 80 years, currently shared equally.
Development value
Roof space, airspace, unused land, garages and conversion potential. Frequently the largest single element and frequently the one the leaseholders’ valuer has not identified.
Leaseback rights
Where you are entitled to require leasebacks of non-participating flats, the price payable falls accordingly.
The statutory process, from the freeholder’s side
| Stage | What happens | Statutory timing | Typical elapsed |
|---|---|---|---|
| Participation agreement | The leaseholders organise themselves, agree how costs are shared and usually incorporate a nominee purchaser company. This happens before you hear anything. | — | Before service |
| Section 13 notice served | The claim. Names the participating tenants and the nominee purchaser, identifies the premises and states the proposed price. | Valuation date is fixed on this date | Day 0 |
| Test qualification | Building, participating tenants, notice validity and any exemption, including the resident landlord exemption. | Immediately | Weeks 1–2 |
| Deduce title | You may require the nominee purchaser to deduce the participating tenants’ title and to provide further information in support of the claim. | Within the periods specified | Weeks 1–4 |
| Inspection and valuation | Your valuer inspects, values every flat and the building as a whole, and considers development value and leaseback rights. | — | Weeks 2–8 |
| Section 21 counter-notice | Admits or disputes the claim, states your proposed price and terms, and elects any leasebacks you require. | By the date in the section 13 notice, not less than two months | By month 2 |
| Negotiation | Between the two valuers. Most claims settle here. Your costs of this stage are not recoverable. | — | Months 2–8 |
| Application to the tribunal | Either party may apply if terms are not agreed. | Between 2 and 6 months after the counter-notice | Months 4–10 |
| Completion | Transfer of the freehold to the nominee purchaser, with any leasebacks granted at the same time. | Within the statutory period following agreement or determination | Months 8–18 |
Elapsed times are typical rather than prescribed. Collective claims commonly take longer than individual lease extensions because the valuation is more involved and the leaseholders must act together.
On tribunal applications
An application to the tribunal is rarely necessary, and where one is made it is most commonly initiated by the participating leaseholders rather than the freeholder. We work efficiently and pragmatically to progress transactions swiftly and to reach a negotiated settlement, so that unnecessary litigation is avoided and neither side incurs costs it cannot recover.
Leasebacks deserve proper thought
A leaseback is a 999-year lease of a flat granted back to you on completion, so you retain an interest in the building after the sale. It also reduces the price payable, sometimes substantially.
For a private landlord it is optional. The election must be made in the counter-notice, so it is a decision to take early rather than one that can be revisited later. Whether it suits you depends on your intentions for the asset: a leaseback preserves an income stream and a foothold in the building, but leaves you with the obligations of a leaseholder in a building you no longer control.
Where the freeholder is a local authority or a housing association, certain leasebacks are mandatory under the legislation rather than a matter of election.
We model the price both with and without leasebacks so the decision is made on figures rather than instinct.
Collective Enfranchisement Premium Calculator
Calculated under Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993
A ball-park range for the price payable on a collective claim. Add a row for each participating flat. The section 13 notice fixes the valuation date.
| Flat | Value (long lease) | Unexpired term | Ground rent £pa |
|---|
Indicative price range
—
This is a ball-park figure only. A collective claim is materially more complex than an individual lease extension. This calculator does not account for development value, hope value or the reversion on non-participating flats, leaseback rights, ground rent review provisions, commercial parts, improvements, defective leases or head leases — any of which can change the figure substantially. It is not valuation advice. The opinion of a specialist RICS Registered Valuer should always be obtained.
Dealing with an individual claim instead? Use the lease extension premium calculator, or open this one on its own page.
What we do
01
Test qualification
Building, participants and notice, before any valuation work begins.
02
Value the freehold
Including development value and the effect of any leasebacks, by a RICS Registered Valuer.
03
Advise on leasebacks
Modelled both ways so the decision is informed.
04
Serve the counter-notice
Drafted by Arcadia Law and served within the statutory deadline.
05
Negotiate or refer
Most claims settle. Where they cannot, we prepare evidence for the First-tier Tribunal.
Your costs are usually recoverable
Under the current law the participating leaseholders are liable for your reasonable valuation and legal costs in connection with the claim, so taking proper advice generally costs you nothing.
The Leasehold and Freehold Reform Act 2024 provides for the removal of this entitlement. That provision is not yet in force and no commencement date has been set.
Where we act
myfreehold is based in London and acts for freeholders across all 32 London boroughs and the City of London, and regularly for clients with property interests throughout England and Wales.
Collective claims frequently involve buildings with development potential, mixed commercial and residential use, or unusual title arrangements. Those are precisely the cases where a valuer who has seen the pattern before is worth having.
Common questions from freeholders
Can I refuse a collective enfranchisement claim?
Not where the building and the participating leaseholders qualify and the notice is valid. It is a statutory right rather than a request. What you can do is test qualification, challenge a defective notice, ensure the price properly reflects what you are giving up, and exercise any leaseback rights available to you.
How many leaseholders must participate?
At least half the flats in the building must participate, and the participating tenants must hold long leases. In a building of two flats, both must participate.
Does commercial floor space defeat the claim?
It can. Where more than 25 per cent of the internal floor area, excluding common parts, is in non-residential use, the building does not qualify. Mixed-use buildings are therefore worth measuring carefully rather than assuming.
What is the resident landlord exemption?
Where the building is not purpose-built, contains four or fewer units, and you or an adult family member have lived in one of the flats as your only or principal home for the last twelve months, the building is excluded. You must also have owned the freehold since before the conversion.
What is a leaseback and should I take one?
A leaseback is a 999-year lease of a flat granted back to you on completion, so you retain an interest in the building after the sale. For a private landlord it is optional: you may elect to require leasebacks of non-participating flats in your counter-notice, and doing so reduces the price payable. Whether it suits you depends on your intentions for the asset. Where the freeholder is a local authority or a housing association, certain leasebacks are mandatory under the legislation rather than a matter of election.
What happens to flats whose leaseholders do not participate?
Those flats are acquired subject to their existing leases, and the nominee purchaser becomes their landlord. Where you take leasebacks instead, you retain the interest in those flats yourself.
Is development value included in the price?
It should be. Roof space, airspace, unused land, garages and conversion potential all form part of what is being acquired. It is frequently the largest single element and frequently the one a leaseholders’ valuer has not identified.
What if the leaseholders miss a deadline?
A claim can be deemed withdrawn where the participating tenants fail to comply with the statutory steps, and a further claim cannot generally be made for twelve months. The position depends on which step has been missed.
Can I recover my costs?
In part. The participating leaseholders are liable for your reasonable costs of investigating title and entitlement, of valuation and of conveyancing. The cost of negotiating the price is not recoverable, and at the tribunal each side bears its own costs.
Will leasehold reform change any of this?
The Leasehold and Freehold Reform Act 2024 makes significant changes to the valuation basis, but the substantive provisions are not yet in force and are subject to a live legal challenge. Claims served now are determined under the current law. See our page on leasehold reform.
Send us the notice
Tell us the building address, the number of flats and the date the notice was served. We will tell you whether the claim qualifies, what the freehold is worth, and what your options are on leasebacks.
Make an enquiry
Where a valid notice is served, the participating leaseholders are liable under the current law for your reasonable costs of investigating title and entitlement, of the valuation prepared for the purposes of the claim, and of the conveyancing on completion.
Two things are not recoverable. The cost of negotiating the premium is borne by you, whatever the outcome. And where either party refers the matter to the First-tier Tribunal, each side bears its own representational costs — there is no general rule that the losing party pays.
On a collective claim, where the valuation is more involved and the sums larger, that makes early and realistic engagement particularly worthwhile. We encourage settlement and do our utmost to facilitate it, but where expectations are unreasonable we will say so and advise on the course that produces the best commercial result.
The Leasehold and Freehold Reform Act 2024 provides for removal of the recoverable element altogether. That provision is not yet in force. More on where reform stands.
Valuation
Blakes Surveyors Ltd
Company no. 9184264
RICS regulated firm no. 752265
Legal
Arcadia Law Ltd
Company no. 10043933
SRA no. 629605
myfreehold is a joint enterprise between Blakes Surveyors Ltd, regulated by the Royal Institution of Chartered Surveyors, and Arcadia Law Ltd, authorised and regulated by the Solicitors Regulation Authority (SRA no. 629605). Both companies are registered in England and Wales.
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