Can I claim the freehold of the block of flats where I am the sole leaseholder?

Quite possibly, yes, if you own a lease of the whole building.

This all depends on whether the necessary qualifying criteria are satisfied for you to make a claim to acquire the freehold pursuant to the Leasehold Reform, Housing and Urban Development Act 1993, if the freeholder is not otherwise willing to engage in a voluntary deal with you.

Whether or not the qualifying criteria are satisfied will depend on a number of things.

A building qualifies under the 1993 Act if it contains flats, with at least two-thirds held by qualifying tenants. A qualifying tenant has a lease originally exceeding 21 years. At least 50% of these tenants must participate in the claim.

Critically no one tenant must own more than two long leases otherwise there will be no qualifying tenant of those flats.

Where there is a headlease of the whole building and none of the flats in the building is subject to an underlease originally granted for a term in excess of 21 years (which is treated as a long lease), the tenants will not be those entitled to make a statutory claim to acquire the freehold (and acquiring the headlease in the process). The person entitled to make such a claim way well be the headlessee, subject to a reorganisation of the headleasehold interest, as identified below.

To establish the ownership structure required for a freehold claim, you must first obtain extended leases of the flats under the headlease. These claims are commonly referred to as Aggio claims, following a decision by the House of Lords that a headlease can make individual lease extension claims for each flat demised by the headlease.

You can claim extended leases for the minimum number of flats required to make a collective claim. However, as any leaseholder joining the claim must not own more than two flats in the building, you will need to reorganise your interests after the extended leases are granted so that no entity owns more than two flats in the building. This step is necessary to ensure the requisite ownership of at least two-thirds of the flats.

If some, but not all, of the flats are held directly out of the headlease, depending on the number of qualifying interests, it may still be possible for you to make the claim without involving any of the leaseholders, noting that the claim must be made in respect of not less than 50% of the total number of flats in the building and that two thirds of the flats in the building must be subject to long leases, whether they are underleases held out of the headlease, or the headlease itself.

Even if your headlease has a short unexpired term, you will be able to qualify to extend leases of the flats that are held directly out of the headlease and not subject to long underleases, provided that the headlease itself was granted for a term of more than 21 years at the outset.  It is therefore immaterial that the headlease might have an unexpired term of 21 years or even less.

This is a scenario that is often overlooked and misunderstood by landlords, in respect of which specialist advice is needed to unlock what might prove to be very significant potential in your headleasehold investment.

If you have any questions regarding this subject please contact Katherine Simpson or any other member of the Residential Property team.