Two statutory rights — collective enfranchisement and the right to manage — give qualifying leaseholders in England and Wales significant power to improve their ownership position without relying on the freeholder’s cooperation. For property investors, understanding these rights and how they interact with any acquisition is important both for assessing the investment case and for identifying opportunities where the exercise of these rights could enhance value.

What Is Collective Enfranchisement?

Collective enfranchisement is the statutory right of qualifying leaseholders in a building to purchase the freehold of that building collectively. It is governed primarily by the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Leasehold and Freehold Reform Act 2024). Where the qualifying conditions are met, the leaseholders can compel the freeholder to sell them the freehold at a price calculated according to the statutory formula.

The qualifying conditions for collective enfranchisement include:

  • The building must be a self-contained building or part of a building.
  • At least two-thirds of the flats in the building must be held on long leases (originally granted for more than 21 years).
  • At least half of the qualifying leaseholders must participate in the claim.
  • No more than 25% of the building’s internal floor area can be in non-residential use.

Where the right is exercised, the participating leaseholders collectively acquire the freehold and, in many cases, extend their individual leases to 999 years at a peppercorn ground rent as part of the same transaction. The benefit to investors is twofold: elimination of the freeholder relationship (and associated service charge risks and freeholder demands) and a permanent solution to the lease length issue.

Impact of the Leasehold and Freehold Reform Act 2024

The 2024 Act introduced significant changes to the collective enfranchisement framework. The most commercially important include:

  • Abolition of marriage value — as with individual lease extension, marriage value is no longer included in the premium calculation for collective enfranchisement claims. This reduces the cost of acquiring the freehold in buildings with short remaining lease terms.
  • Expanded non-residential threshold — the threshold above which a building cannot be enfranchised is proposed to rise from 25% to 50% non-residential floor area, bringing more mixed-use buildings within scope.
  • Simplified process — various procedural improvements are intended to make the process more accessible and less prone to freeholder delay tactics.

As with other provisions of the 2024 Act, the commencement of specific sections is subject to regulations, and investors should confirm the current position with legal advisers.

What Enfranchisement Means for a New Buyer

For an investor acquiring a flat in a building where a collective enfranchisement claim is in progress, there are both opportunity and complexity. The opportunity is that the new buyer may be able to participate in the claim (subject to qualifying conditions and the stage the claim has reached) and ultimately acquire a share of the freehold.

The complexity is that an active enfranchisement claim affects the conveyancing process: the seller’s solicitors must disclose the claim, and the buyer needs to understand whether they are stepping into the seller’s position in the claim or whether the claim proceeds separately. Legal advice is essential in this situation.

For investors acquiring in buildings where no claim is in progress, the key question is whether the building and its leaseholders would qualify for enfranchisement. Where they would, the availability of the right is a positive feature of the investment — it gives a route to freehold ownership and lease extension that is not dependent on the freeholder’s cooperation.

The Right to Manage

The right to manage (RTM) is a separate statutory right that allows qualifying leaseholders to take over the management of their building from the freeholder — without purchasing the freehold and without establishing fault on the freeholder’s part. It is exercised by setting up a Right to Manage Company and serving a formal claim notice on the freeholder.

RTM is available where:

  • The building is a self-contained building or part of a building containing at least two flats.
  • At least two-thirds of the flats are held on long leases.
  • At least 50% of the qualifying leaseholders join the RTM company.

Once RTM is acquired, the RTM company takes over the management functions previously exercised by the freeholder or their managing agent — including arranging building insurance, managing maintenance and repairs, and administering the service charge. The freeholder retains the freehold but loses day-to-day management control.

Investment Opportunities From RTM and Enfranchisement

For investors with the resources and appetite to organise other leaseholders, both RTM and collective enfranchisement can create value by replacing a poorly performing managing agent or a commercially aggressive freeholder with leaseholder-controlled management. Buildings where the service charge has historically been poorly managed, where major works have been deferred or where the freeholder has used the management relationship to extract excessive fees are candidates where active investor engagement in RTM or enfranchisement can materially improve the investment case.

This is not a strategy for every investor — it requires time, organisational capacity and the cooperation of other leaseholders. But for investors with the right profile, understanding these rights before acquisition provides a tool for value creation that many buyers overlook.

Bidq’s leasehold reviews identify enfranchisement eligibility, RTM potential and freeholder risk as part of every leasehold due diligence report. See how Bidq’s auction property due diligence works.