A Fair Lease Extension?

Friday, 10th January 2020
Leasehold Valuations

One common type of enquiry we receive at Peter Barry, involves a leaseholder who’s freeholder also resides in a property in the same building.  The leaseholder wants to extend their lease. As the two parties are neighbours, is it possible to grant this but it will still depend on particular circumstances.

Leaseholder owns Share of Freehold

If both have the same length of lease, you can skip the valuation exercise and go straight to a solicitor for deeds of variation. Typically for 999 years.

Where the lease lengths are different, one leaseholder might pay the other the difference of both valuations for which you will need a specialised surveyor. This difference is far less pronounced when leases are above 80 years and not subject to marriage value.

Not requiring the serving of a formal S42 Notice is often call the informal route and saves significantly on legal fees.

Lease above 80 years

With marriage value not payable, the price for the extension is largely going to be determined by the compensation for loss of ground rent. The value of the property is still relevant 80 and 99 years, but increasingly less so above this.

You could consider a Single Joint Expert report which overcomes the conflict of interest for the surveyor. You would each receive one report in which the valuer would be required to offer their impartial opinion.

This saves the leaseholder the status quo of 2 sets of fees.

Lease below 80 years

The further you fall below this level the more expensive the extension so you will need to evaluate how far your generosity extends. Using an Extension Calculator is a good start.

If you decide to go down the formal route where the leaseholder serves a S42 Notice, there are still fair and unfair ways to act.

The leaseholder pays your valuation and legal fees, so whilst it is never recommended to go as cheap as possible (you really do get what you pay for), it is likely that a mid-ranged priced firm will be as good a choice as an expensive firm.

You also have the final say over what you are prepared to settle at so you should instruct your surveyor accordingly if you enter into negotiations.

Conclusion

This topic was a novel concept but there are freeholders out there to whom fairness is a valid concern

Whilst I hope this has been a helpful guide, this is still a complex field. Speak to our team of experts or drop us an email. We will be more than happy to assist.

Very positive experience of being supported on a complex property valuation matter linked to an inheritance.
We had a great experience with the team. The valuation was completed promptly and efficiently, and we really appreciated their helpfulness and the excellent service throughout.
Very quick and efficient service. Needed a thorough valuation at short notice and was able to arrange this within 3 days and get the valuation within 5 days. Would highly recommend
I recently engaged Peter Barry Surveyors for a RICS Level 2 Home Survey. Excellent service from them. Great customer care and proactive follow-ups by Millie, and a thorough, clear report delivered on time. Professional and responsive throughout the process. Highly recommended!
Prompt and detailed service. A much more realistic valuation than from Estate Agents touting for business.
We had a great experience with Peter Barry Chartered Surveyors dealing with a party wall agreement. Everyone was very responsive and our surveyor Maianh was very polite and professional.
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