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Lease Extensions: what you need to know

 

It is now easier than ever for Owners of Leasehold property to obtain an extension to their lease. Sadly many leaseholders give no thought about the length of the lease term they have until they come to sell. At this point time may be an issue and it may be difficult to obtain the best deal.

Generally today anyone who has owned a long lease for more than two years is entitled to an extension of an additional 90 years on top of the current term with no ground rent payable. The process is straight forward in that a notice is served on the Freeholder requesting the extension and proposing the price the Leaseholder is prepared to offer. The Freeholder then has a period of not less than two months to reply and generally they will agree that the tenant is entitled to a new lease but will want a higher price. If the parties cannot then negotiate an agreed price the price and terms of the lease extension will be determined by the Leasehold Valuation Tribunal. This is a specialist Tribunal for resolving these disputes.

This whole process can take up to 12 months although often these matters can be completed much more quickly. It is also always open to both sides to agree alternative terms and often Freeholders will propose a different lease term and that they retain a modest ground rent income. The benefit to Freeholders in doing this is that they maximise the value of the freehold whilst often the Leaseholder will agree so that they obtain a speedy resolution often enabling them to sell on!

Freeholders and Leaseholders should bear in mind the following:

• take specialist valuation advice. Whilst there have been a number of Court and Tribunal decisions about valuation this is still a very specialised field.
• beware the length of term does not reach 80 years or less. As soon as the length of term reaches 80 years the Leaseholder will have to pay what is called marriage value which increases the price payable
• remember it is possible to transfer a Notice to a buyer of the Leasehold so that they can complete the Lease Extension. You do not have to complete the extension before the Leaseholder sells

This area is one where Freeholders and Leaseholders will benefit from specialist advice.

If you have any queries or just want to obtain a bit more information please contact David Whitney who will be pleased to help.

Please email David at dw@hpwsolicitors.co.uk
and his direct dial number is 0208 735 9783