Lease Extensions – “80 is the magic number”
One of the drawbacks of owning a flat or maisonette on a long lease is that as the term reduces it can impact on both value and saleability. Because of this, the law gives the leaseholder the right to extend their lease once they have owned the property for two years, as outlined in the Leasehold Reform, Housing and Urban Development Act 1993.
But beware of DIY! And of the 80-year rule! Read on…
The informal route, referred to above as DIY
Not really an option – unless you have a legal background, strong negotiating skills and know the landlord really well. You approach the landlord directly and negotiate the terms of the lease extension. The landlord is under no obligation to deal with you and is within his right to refuse to extend your lease or may try to impose whatever terms they like!!
The statutory route for leases with over 80 years to run
This option gives the right to add 90 years to what is left on the existing lease at a “peppercorn” ground rent. For example, if the present lease had 85 years left to run, the new extended lease would be for 175 years.
Check first if the other leaseholders would like to make a joint application to buy the freehold using the collective enfranchisement procedure provided for in the 1993 Act. You cannot apply to extend your lease while an application for collective enfranchisement is being considered. There is strength in numbers…
The landlord is entitled to a premium for extending the lease, based on a formula set out in the 1993 Act. The formal procedure is started by the service of the leaseholder’s Notice on the landlord and it then follows a prescribed route. You however need to make sure you are well prepared – if you fail to meet any of the requirements when asked, your application to extend the lease could be unsuccessful. You will be liable for the landlord’s reasonable, professional fees from the date you serve the leaseholder’s notice, whether or not your application is successful.
Lease with less than 80 years? The Marriage Value comes in
Marriage Value? This is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the longer lease. There is a complex, prescribed way of calculating the Marriage Value. This is an area where the input of a valuer with local knowledge is of great importance to both parties in order to provide comparable evidence of the local market.
Whatever the number of years left on the existing lease – do not wait for the magic ‘80’ number if you can -, we can guide you through the complex process of getting a lease extension – do not hesitate to get in touch for an informal chat.
Contact Gary Green at firstname.lastname@example.org on 020 7625 6003.