Landlords with Leasehold Flats - Extending your Lease to Gain Value
Wednesday 2nd May 2012
If you own a Leasehold flat (whether to live in yourself or as an investment) you may already understand that your lease is a diminishing asset.
As the length of your lease reduces, so does its value and the potential for a buyer to obtain a mortgage when you come to sell (especially if the lease has less than 70 years remaining on it). The latter may undermine a potential sale.
If your lease term has between 80 and 85 years remaining on it, this is a particularly good time to be considering extending your lease. If your lease length dips below 80 years, you will have to pay a larger premium to your landlord/ freeholder because “marriage value” has to be factored in.
Under the Leasehold Reform Housing and Urban Development Act 1993, so long as you own the flat for 2 years or more, you will generally have the right to extend your flat lease by 90 years on top of what is remaining and reduce your ground rent to a peppercorn (i.e. zero). Even if the flat is owned by a company, the legal right to a lease extension still applies. There are some exceptions to this general rule but your solicitor will be able to advise you on this.
In return for the lease extension, you will need to agree a price with your landlord.
There is a set procedure by which you must serve a Notice on your landlord. This Notice will set out the terms upon which you want to extend your lease and the price you would like to pay.
The landlord should serve a counternotice (usually within 2 months) setting out its alternative proposals.
If the price and/or the terms of your new lease cannot be agreed then you can (by no later than 6 months from the counternotice) ask the Leasehold Valuation Tribunal to decide it for you.
Your solicitor will generally work in conjunction with an experienced valuer specialising in this type of work.
Whilst the process for extending your lease is relatively straightforward, there are traps for the unwary in respect of both the strict timescales and procedures that operate in this area of law. However, once you have got your new longer lease, you are likely to have a more valuable asset.
The above is only a summary and is no substitute for taking legal advice on the specifics of your case.
Seddons is a Central London law firm with a specialist enfranchisement team dealing with lease extensions, the acquisition of freeholds and the Right to Manage. It is also a member of the Association of Enfranchisement Practioners.
Seddons also has specialist teams dealing with property, landlord and tenants, disputes, lending, family, probate employment and corporate affairs.
For further advice please contact John Midgley at Seddons on 020 7725 8000 or via firstname.lastname@example.org. or visit
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