Leasehold Extension and Enfranchisement
Might this be of interest?
Leasehold reform legislation has granted lessees of long leases the right to extend their lease (extension), to acquire the freehold to their house or join in with fellow lessees to acquire the freehold interest to their block of flats (enfranchisement). Different legislation hence different procedures, notices and timescales apply to houses and to flats. Reasons for taking advantage of this entitlement may include:
- wishing to take control over the management of the building or to have a greater say in the cost of its maintenance;
- a desire to overcome the reluctance of a landlord to consent to additional facilities or an extension to the property; or
- a need to improve the marketability of your property.
Having acquired the freehold to the property the participating lessees of flats will then be able to grant themselves new leases, perhaps increasing their term from the remainder of an original term of 99 years to a new term of 999 years. On a future sale the property can be advertised as leasehold with a share of the freehold.
Some lenders are reluctant to lend against leasehold properties with a remaining term of 60 years or less making the property harder to market. This problem can be removed by exercising the right to extend the lease in the case of a flat by 90 years or for a house by 50 years.
Is there any urgency?
As the regulations impose a strict timetable (particularly in the case of flats) any notice received (either as landlord or tenant) should be dealt with promptly to ensure that no rights are lost.
For both extension and enfranchisement applications the premium to be paid to the landlord will take into account the length of the remaining term of the lease; the shorter the lease the higher the premium. If 80 years or less remains the valuation must include “marriage value”. In short if approaching that date there is a significant saving to be made by exercising your entitlement before the term is reduced to less than 80 years.
In rare circumstances a problem can arise if a lease has less than five years remaining.
To ensure that any application is not delayed, entitlement lost or unnecessary costs incurred the statutory framework must be followed, correct notices properly served and the statutory timetable adhered to. Many high value properties, particularly in London are acquired by offshore entities and through acting for such clients the property team at Nigel Harris & Partners Limited have many years experience in matters or extension or enfranchisement. We have acted for both lessors or lessees either as individual applicants or as a participator in an application driven by fellow lessees. It is equally important for a client to instruct a valuer who specialises in this area who can provide sound advice as to the likely cost and who is able to defend that valuation in the negotiations with the other party’s valuer. We work with the chosen valuer to assist the client with the decision as to whether or not to proceed and if so produce or negotiate the terms of the documentation required to conclude the extension or acquisition of the freehold.