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Lease Extension is perhaps not the most exciting property issue, but it is nonetheless a very important one for anyone who is a landlord of
leasehold properties, a lessee or a potential purchaser of a flat/apartment. With higher density development now very common a much larger proportion of properties coming to the market, both newbuild and existing residences, are now leasehold rather than freehold.
The term (length) of a lease can vary greatly and mortgage companies are now reluctant to lend on leasehold properties if there are less than 80 years remaining on the lease, potentially making it difficult to sell the property to anyone requiring a mortgage. A shorter lease may also affect the value of the property.
However there are two ways of putting your house (or flat) in order. One is by statute and the other is by agreement with the landlord.
The statute applicable to the extension of a lease term is The Leasehold Reform, Housing and Urban Development Act 1993. In order to go down this route, you have to meet certain criteria:-
1. The lease must be a long lease (over 21 years) and
2. You must have owned the property subject to that lease for at least two years.
If you meet the criteria, you can apply to the landlord to have the lease term extended by 90 years in addition to the remainder of the term and for the ground rent to be adjusted to a “peppercorn” which effectively means that no ground rent is payable. You would of course still be liable to pay any service charge that is due for buildings insurance, communal lighting, repairs etc. The advantage of following the statute route is the certainty of outcome that it provides.
The second way is to approach the landlord directly and to enter into informal negotiations to extend the lease. It may be worth considering extending the lease to 999 years if the landlord is agreeable to this. This would make your property more marketable when you decide to sell. The landlord may think he is entitled to charge you a premium (price) for extending the term of the
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lease so you should consider taking advice from a surveyor before going down that route to ascertain the level of premium they think would be appropriate.
Older leases may contain obsolete clauses so whilst entering into negotiations with the landlord it may be advisable to simultaneously review the lease and amend any anomalies.
Following the route of direct negotiations with the landlord relies heavily upon the landlord cooperating.
The detail of the legal process for extending a lease can be complex and
may require the property owner to seek specialist advice from professionals including surveyors and solicitors. With offices in Sudbury and Braintree, Steed & Steed provides a wide range of legal advice suited to the specific needs of each client.
Jo Perrins: j.perrins@steedllp.co.uk Joanne Edwards: j.edwards@steedllp.co.uk www.steedandsteed.co.uk Sudbury Office: 01787 373387 Braintree Office: 01376 552828
Is your leasehold property losing value?
Jo Perrins of Steed & Steed LLP explores the reasons you should consider extending the lease on your flat