The Leasehold Reform, Housing and Urban Development Act 1993 (as amended) gives flat owners the right to a lease extension of 90 years on top of the current lease, and a reduction of their ground rent to a peppercorn. With few exceptions, if you have owned your flat for two or more years you will have the right to extend your lease.
If you are buying a flat with a short lease all is not lost. Assuming the seller is eligible for a lease extension, he can serve notice on the freeholder enabling you to complete the process once you’ve bought the flat.
As a lease becomes shorter it gradually loses its value, and selling a flat with a short lease can be problematic. Buyers are often wary of leases that have lengths much below 85 years. A number of banks won’t lend against leases with less than 70 years left to run and mainstream lenders drop out of the market altogether where the unexpired term is below 60 years.
The process is started by the leaseholder serving a formal notice on the freeholder. The notice needs to include a proposed premium. You will need a lease extension valuation before you get started. If the proposed premium is too low it could invalidate the notice. If it is too high it will compromise negotiations.
Typically, the freeholder will serve a counter-notice rejecting the proposed premium, and asking for more money. Following the freeholder’s counter-notice the parties have a period of a few months to agree a settlement. If a settlement isn’t agreed, the case can be referred to a Tribunal for determination.
The premium has two parts; the reduction in the value of the freeholder’s interest and where the lease is shorter than 80 years, 50% of ‘marriage value’. The reduction in the value of the freeholder’s interest consists of compensation for lost ground rent and for the deferment of his right to take back possession of the flat at the end of the lease. ‘Marriage value’ is the increase in the aggregate value of the freeholder’s and leaseholder’s interests which arises from the lease extension. The longer the unexpired term, the lower the cost of extending the lease will be, so it’s best to act early. Marriage value can be a significant portion of the premium, so flat owners are well advised to submit a lease extension claim in advance of the 80 year cut off point.
The legal procedures and the legislative basis by which the freeholder is compensated are complicated, so you’ll need a good lease extension solicitor and lease extension surveyor to make sure everything runs smoothly.
Your surveyor will produce a valuation report to give you an indication of how much the lease extension will cost allowing you to make an informed decision about how to proceed. There are a number of variables to consider, many of which are hotly debated amongst valuers. Your surveyor can handle negotiations on your behalf, utilising his specialist knowledge of property values, valuation techniques, statute and case law to ensure you get the best deal possible.
Our specialist lease extension valuers handle hundreds of cases every year. Whilst virtually all of our cases are settled by negotiation, we have the expertise to make expert witness representations at Tribunal if required. Our clients include individuals, investors and large property companies. We pride ourselves on providing them all with solid, straightforward, dependable advice and a high standard of representation.
If you are considering applying to extend the lease of your property contact us today for some initial advice and a quote.
To help you decide which type of report best suits your needs you can browse through these case studies.
With London being London, seemingly any space that can be developed is being developed. The more typical schemes are loft conversions, rear extensions and everyone’s favorite, the basement dig. Another which has become increasingly popular is the extension of one’s demise into vault spaces, which are typically located ... Read More >>
Working as an Architectural Technologist for one of London’s busiest firms of Chartered Surveyors gives me the unique advantage of being surrounded by party wall specialists every day. More importantly, it has allowed me to gain a good understanding of party wall procedures and factor them in to my design projects at an ... Read More >>
The leasehold valuation team here at Peter Barry recently attended the annual Leasehold Advisory conference that brings together tenants, managing agents, solicitors, valuers and all other people/bodies that have a interest in the current leasehold sector. The conference was celebrating its 15th year and whilst a lot has ... Read More >>