At Peter Barry, our experienced lease extension surveyors work with both leaseholders and freeholders, valuing property and assisting with the complex process of lease extension in London.
If you currently own a leasehold property, it’s likely that you are already aware that as your lease gets shorter, its value decreases. While this does not necessarily pose a problem while living in your home, a short lease can be problematic when the time comes to sell it. Buyers are often wary of shorter leases, and a number of banks will not lend against leases under 85 years.
The Leasehold Reform, Housing and Urban Development Act (1993) gives flat owners the right to extend their lease by 90 years, and a reduction of their ground rent to “a peppercorn” (zero). In our experience, the majority of lease extensions fall under this legislation, however we are also familiar with the Landlord and Tenant Act 1987 (the 1987 Act), which applies in certain circumstances.
To be eligible for a formal lease extension, homeowners must;
• Own a long lease (usually at least 21 years from when it was originally granted) and either;
• Have owned the property for a minimum of two years or;
• Be completing an extension process that was started when a former, eligible homeowner served notice.
There are a few exceptions, which include commercial or business leases, and if the property is provided as part of a charitable housing trust.
The process begins when the leaseholder serves a formal notice on the freeholder. This notice needs to include a proposed premium, so it’s important to obtain a lease extension valuation beforehand. A proposed premium that is too low can invalidate the notice, but if it is too high you may compromise your negotiations.
Once the notice has been served, the freeholder will typically serve a counter-notice that rejects the proposed premium, requesting a higher sum. The two parties then have to agree a settlement figure within a few months, or else the case gets 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 first part comprises compensation for the freeholder’s lost ground rent, and for the deferring their ability to reclaim the property by another 90 years. The second part, ‘marriage value’, is the increase in the combined value of the freeholder’s and leaseholder’s interests arising from the lease extension.
The more time you have left on your lease the less it will cost to extend it, so it’s always best to act early. As marriage value can be a significant portion of the premium, it’s advisable to submit a lease extension claim well in advance of the 80-year cut off point.
The legal procedures surrounding freeholder compensation are complicated and will require the assistance of a good lease extension surveyor and a solicitor with experience in leasehold law.
Your surveyor is responsible for producing a valuation report indicating how much the lease extension will cost, allowing you to make an informed decision about how to proceed. Each case will have a number of variables which tend to be debated between valuers, so appointing a surveyor that you trust to negotiate on your behalf is essential. Choose a firm with specialist knowledge of local property values, valuation techniques, statute and case law to ensure you get the best possible deal.
At Peter Barry Surveyors, our specialist valuers handle hundreds of lease extensions in London every year. Virtually all of our cases are settled by negotiation, but we are also familiar with the process of making expert witness representations at Tribunal if required. Our clients include individuals, investors and large property firms, and we pride ourselves on delivering reliable, straightforward advice and a high standard of representation in every case.
If you are looking to extend your current lease and would like advice and assistance from a qualified lease extension surveyor, contact us today to discuss the details of your claim and receive a free quote.
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