LEASE EXTENSION

AVOID PROBLEMS WITH SELLING

OR RE-MORTGAGING

How to increase the value of your flat with a lease extension and stop paying ground rent...

The Leasehold Reform Housing and Urban Development Act 1993 (as amended) is legislation which gives you the right to get a lease extension term of 90 years on top of your present unexpired lease term. The ground rent for the entire period is free (technically, peppercorn rent).

Common reasons for a lease extension include:

A short lease giving issues selling or re-mortgaging the flat
Purchase of a flat with a short lease; you can use the present owner's ownership period to qualify you to apply for an immediate lease extension, without having to wait for the 2 year ownership requirement
A significant ground rent increase clause, which can even be a percentage of value thus making the flat unattractive to buyers
Your existing lease is approaching 80 years remaining. If you have less than 80 years left on the lease, you will have to share the increased value of your flat 50:50 with your landlord

For example, if you have 64 years to run on your lease, you could extend it to a total of 154 years - all ground rent free. There is a one-time payment, known as the "premium", to the landlord to extend lease.

Can you do it yourself? Yes, but be aware of the pitfalls. If the freeholder does not want to do a lease extension, or wants an unreasonably high premium, their solicitors can be particularly difficult. As experienced project managers, we can act on your behalf to check your eligibility, estimate the landlord's premium, prepare and serve the Notice of Claim upon your Landlord, deduce Title and follow up by negotiating on your behalf. We can search for 'absent or intermediate Landlords' and assist in arranging for an independent leasehold valuation to be carried out if required.

TO BE ELIGIBLE, YOU MUST MEET THE QUALIFICATION REQUIREMENTS.
To be a qualifying leaseholder you must own a "long lease", and have owned it for the past two years and not be a business or commercial tenant. In the case of a Buy-To-Let owner holding the property in a business name, as long as the lease is a residential lease, the owner will still be eligible for a lease extension.

You do not need to have lived in the property for this period, merely owned the lease for two years or more.

A long lease, by definition, is:

A lease of a term of years in excess of 21 years when originally granted - the present unexpired term is not relevant.
A shorter lease which contains a clause providing a right of perpetual renewal.
A lease terminable on death or marriage or an unknown date (including the so-called "Prince of Wales" clauses).
A leaseholder having held over at the expiry of a long lease, and the landlord has not served a notice terminating the tenancy.
A shared ownership lease where the leaseholders' share is 100%.

You cannot complete a lease extension if the landlord is a charitable housing trust and the flat is provided as part of the charity's functions, or if :- the building in which your flat is located is within a cathedral precinct, or if it is owned by The National Trust. Crown properties are also excluded; although the Crown is not bound by the legislation the Minister has stated to the House of Commons that the Crown will be prepared to comply with the principles of it.

Once the Tenant's Initial Notice has been served it may be assigned with the lease when the flat is sold. This way the present owner (leaseholder), assuming they meet the qualification requirements, can serve the notice and then sell the flat. The purchaser will be able to proceed with the lease extension immediately, without having to meet the two years ownership qualification for lease extensions. This can be of assistance especially where a purchaser does not want to wait to become 'qualifying' and / or where an existing short term of lease presents mortgage difficulties. Note the law is applicable in London, England and Wales.

FURTHER INFORMATION
Although it is not a legal requirement, we would recommend you appoint a leasehold valuation surveyor who would provide the "best and worst" case valuation, to be used in the Notice and possibly represent you at the Leasehold Valuation Tribunal (LVT), if required. Fortunately most extend lease cases are agreed without the need of the Tribunals.

When a price has been agreed, the Landlord typically issues a new lease or deed of variation. At this point you should contact a solicitor to verify on your behalf any modifications, exclusions or additions and to correctly register the new lease or deed.

Note: Under the terms of the Act, with a formal lease extension:

You will be liable for the 'reasonable' legal and valuation costs of the Landlord relative to the Notice of Claim.
You may be required to pay a deposit of 10% of the proposed purchase price or £250; whichever is the greater, immediately following the service of the Notice of Claim.
You should have your finances in place relative to all the various costs that you will incur which would include the eventual price (premium) payable to extend lease etc.

Buying the Free Hold Its not for sale

Hi Mark

I hope you are well?

Thanks for getting in touch with me. UK Ground Rent Estates (6) Limited owns a head lease with the freeholder (Adriatic Land 1 (GR3) Limited). There would be no benefit to you in acquiring the head lease, because due to the lease with Adriatic, there is an obligation for UK Ground Rent Estates (6) Limited to pay up to Adriatic the aggregate of the ground rent received.

Adriatic are not disposing of any of their freeholds at this moment in time.

I hope this helps.

Kind regards

Diane Fletcher

www.adderstonegroup.com

For and on behalf of Adderstone Asset Management Limited.
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