19 Nov 2019
04 Sep 2019
Leasehold is by far the most common type of flat ownership. Where you own the leasehold on a property you effectively rent it for the period of time stated on the lease which can be years, decades or centuries. However, the number of years left on a lease is crucial when it comes buying, selling or re-mortgaging your home.
Any potential buyer will struggle to be accepted for a mortgage once the unexpired lease term falls below 70 years, in addition once your lease term drops below 80 years it will attract what is known as marriage value and will become considerably more expensive to extend. Do not become complacent if you have a lease term over 80 years because you are fortunate. You should take the opportunity to at least get advice on the benefits of extending your lease and the statutory process set out in the Leasehold Reform Housing and Urban Development Act 1993.
The process which can be referred to Leasehold Enfranchisement gives flat owners who have owned their property for at least two years and who meet certain specified criteria the right to extend their lease by 90 years and have the ground rent reduced to a peppercorn. They also have the option to buy the freehold to their block, but they’ll need to join together with neighbours to do so.
Formally extending a lease is very process driven and requires strict time frames to be adhered to. In summary, the leaseholder’s notice triggers legal procedures and it sets out the terms under which the tenant is proposing the new lease is granted, the premium the leaseholder is willing to pay in exchange for the lease extension and it must also provide a date upon which the Landlord must respond to the notice which must be no less than two months from the date of the notice.
The premium to be paid is in reality a matter of negotiation between the leaseholder’s and freeholder’s surveyors. They deal with complex calculations around the current length of the lease, the location of the property, the ground rent, the value of the flat with the lease as it is and the value when it is extended, it is therefore vital that before the formal process is activated that you have obtained a valuation from a surveyor for the lease extension. Currently, the leaseholder pays for their own surveyor and solicitor costs and also the freeholder’s reasonable legal and surveyor costs so this must be budgeted for at the outset.
After the tenant’s notice has been served the Landlord can request evidence of ownership along with a deposit for the lease extension and they must also serve their counter notice within the two month time period. The counter-notice must do one of the following, admit your right to the new lease and accept your terms (or propose different terms, i.e a different premium value), not admit your right and give the landlord’s reasons for this or claim that the landlord has the right to redevelop and refuse to grant the new lease.
A period of negotiation of two to six months from the date of the Landlords counter notice ensues and provided all matters can be agreed the new lease can be completed and registered at the Land Registry.
The rules are different for houses and extensions can be negotiated on a more informal basis, but no to worry our expert team of Conveyancing Solicitors can help every step of the way.