If Freeholder’s consent is required be prepared to pay for it

Tuesday, 30th October 2018 | by: Matthew Price

Despite evidence of falling values in some areas on London, house prices in the capital remain amongst the most expensive in the world. If Stamp Duty is factored in, £20,000 would be payable on a £600,000 zone 4 mid-terraced 3 bedroom house, it is no surprise that many people choose to extend their property rather than move. This post specifically relates to leaseholders proposing to undertake alterations.

The most common types of work are loft and rear extensions and to a much lesser extent, basement extensions. We have already covered ownership of loft spaces in a previous post and we regularly undertake valuations of loft spaces – it would be fair to say that the public’s knowledge of the subject is getting increasingly better.

What is perhaps less commonly known, is the potential cost faced by leaseholders who wish to make internal alterations or undertake a rear extension. From our experience, they often get some way into the process before realising that the freeholder may have the right to withhold consent for such works and therefore charge a premium if they do decide to provide that consent.

As always, the devil is in the detail, and in this case that will come down to the wording of your lease. The lease is always the starting point in determining what you can and cannot do and what you do or don’t require consent for. A surveyor should be able to provide some initial guidance but the services of a solicitor may be required to be 100% certain. Our Chartered Surveyors deal with these types of queries on a regular basis, so do always feel free to enquire, but the key will be whether the alteration covenant in the lease is restrictive or absolute.

Rear extensions are often the subject of misinformed assumptions. Your lease and title will most likely show that you own your garden along with the flat within your 4 walls but, in order to create your extension, you will need to cut open the external fabric of the house and in the vast majority of cases that is owned by the freeholder. If the freeholder owns the external fabric they can almost certainly refuse you consent to alter it or charge you a fee if they do consent. The calculations are very much the same as they are with loft conversions and are often referred to as ‘development valuations’ or, for the technically minded, residual valuations.

The same situation may arise in respect of internal alterations. If you take a large 60 m2 /646 ft2 one bedroom flat and come up with a design to section off a second bedroom, the value of the property could feasibly increase from £300,000 to £375,000 if done correctly. The details of the alteration clause will again be key but be prepared to part with half of your hypothetical profit if the freeholder’s consent is required.

Regardless of whether a premium is payable, you will still require a license to alter from the freeholder, which protects not only their interest but also the leasehold interests of any adjacent properties that may be impacted by the works. Understanding the full scope of the likely procedure and knowing which professionals will need to be involved in your project, from Architect, engineer, surveyor and solicitor, will benefit you massively.

The team here at Peter Barry have a large cross section of skills to guide you through from start to finish. Please either email us or call us on 020 7183 2578.