Part 2 - Leasehold enfranchisement and extension Section 31: Acquisition of intermediate interests in collective enfranchisement
Section 31 replaces Section 2 of the LRHUDA 1993 with a new Schedule (Schedule A1) which governs the acquisition of leases and parts of leases during a collective enfranchisement. Section 31 also makes consequential amendments to the LRHUDA 1993 to address the substitution of Section 2 with Schedule A1.
	Paragraph 1 of Schedule A1 introduces the provisions of the Schedule. There are a series of gateways set out in the Schedule for acquiring leases (or parts of leases) during a collective enfranchisement claim:
The mandatory gateways, which require the nominee purchaser to acquire a lease, are listed in paragraph 1(2).
The optional gateways, which let the participating tenants choose whether the nominee purchaser will acquire a lease, are listed in paragraph 1(3).
	Paragraph 2 deals with an intermediate lease (a) that is superior to the lease of a qualifying tenant and (b) that relates to the qualifying tenant’s flat (or appurtenant property let with that flat). Under paragraph 2, there are two gateways for acquiring this intermediate lease, one mandatory and one optional. Which gateway is used depends on whether the qualifying tenant of the flat is participating in the collective enfranchisement claim.
	If the qualifying tenant of the flat is participating, the superior intermediate lease must be acquired (under paragraph 2(4)).
	If the qualifying tenant of the flat is not participating, the nominee purchaser may acquire the superior intermediate lease but does not have to do so (paragraph 2(5)).
	These gateways only apply to the part of the intermediate lease that relates to the relevant flat (and associated appurtenant property). Any parts of the intermediate lease that relate to other property cannot be acquired under paragraph 2 (although they may be acquired under paragraph 3, if applicable).
	Paragraph 2(6) deals with the situation in which an intermediate lease includes several flats sublet to non-participating qualifying tenants, as explained in the following example.
A block of flats is let on a headlease. The flats are sublet to qualifying tenants and a collective enfranchisement claim is made. Flats A and B are let to non-participating qualifying tenants. The nominee purchaser can choose whether to acquire the part of the headlease that relates to Flat A, or the part that relates to Flat B, or both parts. But the nominee purchaser cannot choose to acquire only a part of the headlease that demises (for example) the kitchen of Flat A, without acquiring the rest of the headlease of Flat A.
	Paragraph 2(7) deals with a situation in which a qualifying tenant has obtained a longer, superior lease of their flat (in addition to their qualifying lease), for example, as an alternative to a lease extension. Provided the longer lease is immediately superior to the qualifying lease, it cannot be acquired by the nominee purchaser.
	In certain circumstances, qualifying tenants may stop or start participating in a collective enfranchisement claim during the course of the claim. Given the new rules in paragraph 2, changes in participation may affect whether the acquisition of an intermediate lease of a flat is mandatory or optional. Subsection (10) of Section 31 allows corresponding amendments to be made to the claim notice, to add or remove the proposed acquisition of an intermediate lease.
	Paragraph 3 sets out an optional gateway for acquiring leases of common parts of the building or leases of a "section 1(3)(b) addition". A Section 1(3)(b) addition is property which a qualifying tenant in the building is entitled to use in common with other tenants and which is acquired with the building as part of the collective enfranchisement.
	The participating tenants can choose how much of a lease of common parts or a Section 1(3)(b) addition they want to acquire. This provision entrenches the decision of the Upper Tribunal in Hemphurst Ltd v Durrels House Ltd [2011] UKUT 6 (LC), which held that parts of common-parts leases could be acquired on a collective enfranchisement.
	However, the acquisition of the lease of common parts or a Section 1(3)(b) addition must meet the test in paragraph 3(3): acquiring the lease must be necessary for maintaining or managing the property demised by the lease on behalf of the participating tenants. However, under sub-paragraph (4), a lease cannot be acquired if the leaseholder grants easements that are sufficient to enable proper maintenance or management.
	The gateway in paragraph 3 does not allow any parts of a lease to be acquired that relate to property other than common parts or a Section 1(3)(b) addition.
	Paragraph 4 sets out a further mandatory gateway for acquiring leases. It applies where the participating tenants have chosen to acquire a lease of common parts or a Section 1(3)(b) addition, or an intermediate lease of a non-participating qualifying tenant’s flat, under the optional gateways in paragraphs 2 and 3. The nominee purchaser must acquire any lease or part of a lease that is superior to the lease or part of a lease that is being acquired under the optional gateways.
	Section 21(4) of the LRHUDA 1993 allows a landlord to require the nominee purchaser to acquire a freehold or leasehold interest in certain circumstances. Paragraph 5 applies if the landlord requires the nominee purchaser to acquire a lease (or part of a lease) that would have fallen within paragraph 4 had the participating tenants chosen to acquire it. In these circumstances, paragraph 5 applies the rule in paragraph 4. All leases (or parts of leases) that are superior to the lease being acquired under Section 21(4) must also be acquired.
	Paragraph 6 preserves the exception for public sector landlords formerly set out in Section 2(5) and (6) of the LRHUDA 1993.
	Paragraph 7 confirms that, where the nominee purchaser acquires part of a lease belonging to a landlord under Schedule A1, the lease is severed, and the landlord retains the other part. See the tribunal’s power to determine the terms of severance in Section 42(6) (new Section 91(1)(h) of the LRHUDA 1993).
	Paragraph 8 clarifies that different parts of the same lease may be acquired via different gateways in Schedule A1, or via the repeated use of the same gateway.
	Paragraph 9 sets out definitions for the purposes of Schedule A1.