© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
A collective enfranchisement process is like preparing for a wedding – everything has to be brought together for the day when you complete on the freehold, and then comes the marriage, when you actually have to take responsibility for each other’s amenity in the building. Many of the disputes which arise after the honeymoon joy of being rid of the former landlord can be avoided if they are considered and addressed in the participation agreement (“PA”), the paper which all the participants sign (or should sign) before they embark on the freehold process.
Always remember that the PA is a binding contract, whereby, at its most basic, you will undertake to each other to produce your funds when required (stating either each person’s % or how it will be calculated), and to grant to each other shares in agreed proportions in the freehold company and the new 999 year leases of your flats once the freehold is acquired. It will (or should) state how the non-participating flats will be funded. It is enforceable in law, which is why it will often have a specific right to withdraw if the price is a lot more than the initial valuation suggests.
It can also deal with what you want to do in the building after you have the freehold – for instance the appointment of managing agents, a 5-year major redecoration plan, and even improvements to the building not covered by the service charges, where the PA will be the only means of enforcing payment contributions. If it is vital to any of you that they be allowed to take some action in respect of their own flat(s), e.g. joining two flats together, then that should be there too. One building I advise is split down the middle over whether to keep the resident caretaker; does her benefit outweigh her cost? A classic example of an issue which could and should have been discussed at the outset and recorded in the PA. On the other hand, another building included in the PA that four flats would carry out their intended major alterations at the same time, so as to share scaffolding and minimise the overall period of disruption to the building.
A key area after the freehold is acquired is how you as a group are going to make decisions; will you depute one or two of you to instruct the managing agents, keeping the others informed? Will you try through email to make decisions collectively? This should also ideally be covered in the PA. But the managing agents will usually ask for one of you to be their source of instructions.
There is no limit on what you can agree in the PA, and my advice to clients is always to think ahead and try to agree not only on the steps towards acquiring the freehold, but also on the first years which follow so that you can maximise the benefit of the project for the homes in which you have invested so much.
John Stephenson is the Senior Partner of Bircham Dyson Bell