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We provide a fixed fee, efficient and experienced conveyancing service for lease extensions helping you to successfully either process an agreed extension or negotiate with the freeholder whilst at the same time following the necessary statutory procedure.
Lease extensions are particularly common in London with the thousands of houses converted into flats. It is often necessary to start the statutory procedure to extend, based on 2 years ownership, whilst in practice, most extensions are agreed by consent.
The reason for this is that the freeholder cannot resist the extension as long as you qualify to extend and comply with the procedure, and the premium will be within a fairly narrow band. Consequently, there is little real incentive for freeholders to be difficult, but some still are!
Our solicitors can also assist with negotiations on the premium to extend a lease. If you are unable to reach an agreement with the freeholder after exhausting negotiations and the statutory procedure, you would need to apply to the Leasehold Valuation Tribunal to decide the correct premium. Our litigation department can assist with such applications, which are chargeable on a time basis.
In instructing our lawyers, you can be assured of specialist expertise.
In order to be able to exercise this right, you must satisfy certain criteria.
To use this process the property in question must be a flat. In order to have the right to extend your lease, you will have to be able to show that you have owned the lease for a minimum of 2 years. It is important to note that the duration of your ownership is not calculated from when you purchased the property but from the date that you were registered as the leasehold proprietor at the Land Registry.
You must check to see what length of the lease term remains. If the remainder of the term is 80 years or less, you will be liable to pay what is known as marriage value which can potentially be substantial. This should therefore be ascertained as soon as the option to extend the lease is considered.
As stated above the price payable is calculated in accordance with a statutory formula but is commonly negotiated using the formula as a guide. Whilst there is no requirement to have a formal valuation, this is usually advisable as having a detailed valuation carried out by an expert surveyor enables you to negotiate with certainty. It is also advisable to ascertain the likely premium at an early stage to ensure that obtaining a residential lease extension is financially viable.
Either with your freeholder or their managing agent outside of the statutory procedures laid down by the Leasehold Reform Act. In this case, you are somewhat in the hands of the freeholder.
If the lease extension is successfully obtained, you have the legal right to be granted a new lease with a term equal to the remainder of the term under your existing lease plus a further 90 years. The extension will also result in the ground rent being reduced to a peppercorn.
There are set procedures required to force a freeholder to extend a lease, and these issues are becoming increasingly common as a prelude to selling a flat which has 70-80 years or less left to run.
Extend before there are less than 80 years left to run
The general rule is that the shorter the residential lease the more expensive it is to extend. Anyone with a lease approaching 81 years unexpired should seriously think of extending it as soon as possible. As soon as a lease has less than 80 years to run, under the relevant legislation the Landlord is entitled to calculate and charge a larger amount, based on a technical calculation, and somewhat strangely known as “marriage value” which is payable to the landlord.
Check your eligibility
A leaseholder cannot use the legislation to force an extension unless he/she/they have owned the flat for 2 years. Ownership is relevant not occupation. The original lease needs to be long (over 21 years) and it should be residential, as opposed to commercial use.
Instruct an experienced, specialist property solicitor
The property lawyer will generally start the process by serving an Initial Notice on the landlord (although an informal, “without prejudice” offer may also have been made) , which will offer a premium for extending the lease. The process of extending a lease has strict time limits once the notice has been served and the Landlord may then serve a counter notice demanding a higher premium, with supporting evidence, or accept the offer made.
You will also need to instruct a valuer, probably a chartered surveyor, to put a value on the lease extension.Get a quote in writing first. Most surveyors will charge a fixed fee to prepare the initial report which will avoid hidden extras and disbursements.
This fee should cover the initial inspection of the property and making all the calculations. Obviously there are extra charges if the surveyor is asked to negotiate with the landlord or their agent or for any further work required if the valuation cannot be agreed. If they act for several flats in the same building they can usually offer substantial discounts so it’s probably a good idea to team up together, if several of you are going down this route.
Be aware of costs
Once the Initial Notice is served on the landlord you will be responsible for his/her reasonable valuation and conveyancing costs, as well as your own. The Notice is also important in setting the valuation date
Avoid agreeing other variations to the lease if possible
Under the Act you are entitled to a further 90 years on your lease with no ground rent payable on the original term or extension, but many if not most extensions are ultimately concluded by negotiation.
It is quite common for a landlord to try and agree an increase in ground rent, as a condition for extending quickly and without waiting for notices to expire and/or applications to the Leasehold Valuation Tribunal has that is incorporated within the cost of extending. You still have to pay the service charge for the tribunal. However, such exchanges should be avoided if possible.
Increased value of long leasehold interest after extension
Although there are costs involved, the upside is that after the lease extension, your flat will usually be more valuable and saleable should you want to sell or remortgage. Buyers are often put off by short leases and mortgage companies won’t generally loan on properties with leases shorter than 60 years, although the exact cut off varies around the market.
Subject to how efficient you are, your freeholder, their solicitor, your solicitors and your surveyor, this whole process could take from 6 weeks to 12 months.
Many flat owners are completely unaware that the issue of extending the lease may become an obstacle and delay when selling. It can usually be resolved but often requires some negotiation and possibly delay and extra cost.
The solution to the problem is often :-
If you need experienced and proactive property solicitors for extending your lease, contact us – we deal with lease extensions on a regular basis.