Flats – Lease Extensions

LEASE EXTENSIONS ON FLATS

If you have a flat (or maisonette) with a short lease, that is with less than 70 years remaining, you are probably concerned that the property has become difficult to mortgage and harder to sell, and are looking for advice on lease extensions on flats to see how you can sort out your position.

If you are interested in finding out more about lease extensions on flats, please have a look at our page specifically on flat lease extensions which will give you further information.

Or ring us for outline of the valuation principles to determine the price for extending a lease of a flat under the Leasehold Reform Housing and Urban Development Act 1993.

The Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) provides leaseholders with the right to extend their lease; subject to certain qualifying criteria being met.

In brief, the Act provides the leaseholder with a right to extend the lease term by a further 90 years and extinguishes the ground rent. This is known as a statutory lease extension. The right is one of compulsion, as historically a Freeholder could demand a premium at its discretion or just refuse a lease extension .

Unlike a Freehold asset which grants ownership for an infinite period, a leasehold asset is an ownership for a defined number of years. Over the course of time as those years reduce, so does the value of the Leasehold property. Furthermore, as the term of the lease gets shorter, the premium payable for the extension increases. Therefore a lease is often described as a depreciating asset.

Check the term of years left on your lease.

Warning! Please do not become complacent if you have a lease term over 80 years because you are fortunate. Now instead of putting away your lease and forgetting about the issue you should take the opportunity to at least get advice on the benefits of extending your lease using the Act.

The effect is that you will pay a premium to obtain an additional 90 years to the existing term and the ground rent is reduced to a peppercorn. A lease term above 80 years does not attract marriage value.

First read up on the basics of qualifying. Then contact someone like us who specialise in Leasehold Enfranchisement. We can advise whether you and the building qualify pursuant to the Act in the first instance and provide an opinion on the likely premium to be paid for a lease extension. We will also provide a range to your premium with a lower premium that should be inserted into the section 42 Notice to allow room for negotiations.

The Act states that the leaseholder’s figure stated in the section 42 Notice has to be realistic. A well-known elephant test may be applied as to whether a figure is realistic. This may be difficult to describe but you know when you see an unrealistic figure.

Further to case law the test now would be a “genuine opening offer” i.e. a bona fide offer. Notably, any surveyor should be able to justify the valuation for the notice figure if it came to the Tribunal. The next step is to prepare the section 42 Notice which initiates the claim.

Once a valid section 42 Notice is served a strict timetable is triggered. Instructing specialist advisers will mean your interest is safeguarded.

It is likely that a landlord will request payment of the statutory deposit once the notice is served. This will be either 10% of the premium quoted in your initial notice or £250, whichever is greater.

Please contact us for further information or Call us now on 0121 427 2800

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House Lease Extensions