Lease extensions
Leasehold flat ownership
Leasehold ownership of a flat (or maisonette) is simply a long tenancy, the right to occupation and the use of a flat for a long period - the 'term' of the lease. When initially sold they are usually on terms of 99 or 125 years. As the term is fixed at the commencement of the lease it will decrease in length year by year. Over time the value of a flat will diminish until the eventual expiry of the lease at which point ownership of the flat reverts back to the landlord. As the term of a lease decreases, the cost of extending it increases. Short leases (considered to be less than 80 years) are an extremely common problem and often affect the future sale of a property.
Extending a lease
The Leasehold Reform Housing and Urban Development Act 1993 (as amended) is legislation which provides most leaseholders of flats with the legal right to require their landlord – the freeholder - to sell them a 90-year lease (in addition to the remaining lease term), at a fair price. Additionally any ground rent payments are abolished from the point of completion of the lease extension and any other lease amendments that are necessary to perfect any imperfections within the original lease.
The main criteria to being a Qualifying leaseholder is you must have owned the lease for the past two years and the original lease when granted (not the current unexpired term) was originally over 21 years in length. Whilst buying a lease extension often takes months you can transfer, or “assign” a lease extension application to a buyer, so he or she does not have to wait the two years qualifying period before extending the lease.
Although recent legislation is making extending the term of leases easier, the legislation requirements can be both confusing and time consuming and complying with the statutory procedures is a requirement of the Act. Instructing professional advisers is advisable.
Advisers Roles - The Surveyor
This is our role and generally falls into three sections.
1) The first is to inspect the property and carry out an assessment of the likely premium to be paid for the lease extension and to advise on the amount of the offer to be made in the initial Notice (the offer figure must be reasonable as a landlord can seek to have the notice declared invalid by a county court if it is ridiculously low). We will provide this for a fixed price of £325.00 + VAT.
2) The second is if the landlord serves a counter notice demanding a higher price than stated in the original notice (the landlord has two months from the date of the notice to serve a counter notice) to enter into negotiations with the Freeholders advisers to hopefully agree a figure.
We will provide this service for a fixed price of £325.00 + VAT.
Please bear in mind that a premium assessment cannot produce definitive values. It is almost inevitable in assessments for 1993 Act procedures that the leaseholder's assessment and the landlord's assessment will be some way apart.
The vast majority of cases are settled by this point
3) If the case has not been settled by this point then the matter will need to either be settled by written submissions or by a tribunal hearing to the leasehold tribunal.
By written submission this service is at a fixed price of £400 + vat
By personal attendance at a tribunal hearing at a fixed price of £950 + vat
Advisers Roles - The Solicitor
You will need a solicitor, ideally one familiar with Leasehold reform, to act for you.
The solicitor should be able to:
- Deal with sale and purchase Conveyancing services
- If appropriate establish that you are a ‘Qualifying Lessee’, they may need to obtain a copy of your title and lease from the Land Registry to assist with this
- Collate and prepare all the necessary information for the application, service of relevant notices, responding to Landlords requests for information/counter notices, drafting or approving the lease extensions and registering it with the Land Registry
- Assignment of the benefit of an initial notice to a prospective purchaser where appropriate to start a formal lease extension application
- Any other applicable legal work
If you do not have a solicitor who can act for you we have a long term relationship with a local firm of solicitors who specialise in this type of work. Their fees are very competitive and their service excellent.
We would be happy to put them in touch with you if required. For further details please contact us on 0845 604 1624.