Leases are commonly known as diminishing assets. This means that the leasehold term gradually shortens as time goes on. As a result, leases with less than 80 years remaining may be challenging to sell or secure a mortgage on.
Therefore a lease extension is required. Arranging your lease extension early will help to safeguard the value of your property. But don’t worry we can help.
Lease Extension Lawyers – What is a voluntary lease extension?
A voluntary lease extension is when you have an agreement with the freeholder to extend your leasehold term. Under this circumstance a lease extension may be straightforward.
Lease Extension Solicitors – What is a statutory lease extension?
A statutory lease extension is when the freeholder does not agree or is proposing unreasonable terms. The government has a piece of legislation that enables you to extend your leasehold agreement for an additional 90 years, plus a nil ground rent term is applied. But, to qualify you must have owned the property for more than 2 years.
How can Attwells help?
Firstly, your lawyer will serve an S.42 Notice to the freeholder. This notice will set out the basic details about the property and the fee you would be willing to pay for the extension. Next, the freeholder has the right to respond. This is with a counter-notice, which sets out their terms. Typically, this is followed by a period of negotiating which your lawyer will do on your behalf. Finally, the lease extension is agreed upon.
Lease Extension Solicitors – Our Lease Extension Guide
In order to apply for a lease extension, you must serve notice on the freeholder. The notice served upon the freeholder will include the fee you expect to pay for the new lease.
However, for the purposes of negotiation, you should have the property valued. Consequently, your valuer will often advise you to put in a figure that is less than what you actually expect to pay.
What is a valuation date?
Firstly, the date of service of the notice of claim is the “valuation date”. This is used to calculate the amount of premium to be paid.
Your lawyer will recommend that the notice is registered at the Land Registry once served. This will protect your claim if the freeholder sells the freehold during the currency of your claim.
Once you have served notice on the freehold, they then have two months to respond.
Paying the freeholder to extend your leasehold term
Next, the freeholder will ask for a deposit to be paid. Typically, this will be 10% of the fee that you agreed to pay for your lease extension. In addition, the freeholder will also request access to the property to carry out a valuation of the property.
As a result, the freeholder will then serve a counter-notice. Usually, this admits the claim and will contain counterproposals in respect of the fee to be paid.
What happens if my lease extension is rejected?
However, it is possible for the freeholder to reject a claim. For example where the freeholder has clear plans to redevelop the building. In order to reject the claim, the freeholder must make an application to the court and prove the grounds for the rejection.
Negotiating your Lease Extension
However, if negotiations are stalling, either party may apply to the First-tier (Property) Tribunal. Typically, this is so that any disputed issues, such as the price or the lease terms, can be determined.
But, such an application must be made by one of the parties before the end of six months following the service of the counter-notice. Otherwise, the claim for a new lease is deemed to have been withdrawn and you will be unable to make a further claim for a period of one year after that date.
Lease Extension Terms
In addition, even where it is expected that the lease terms will be agreed between the parties, it would be usual to apply to the Tribunal for a hearing date as this acts to focus the minds of the parties to bring negotiations to an end. The hearing date is usually three to four months after the application is made.
Taking your case to a tribunal
Rarely, it might be necessary to make the application to the Tribunal to protect your claim (because time is running out and terms have not been agreed upon) it is rare for the Tribunal to actually decide the lease terms. Normally, this is because a hearing at the Tribunal is to determine the cost payable to the freeholder, if it’s too expensive for example, or if the terms are unreasonable. Therefore, they would only be advised where the difference between the valuers is significant and the gain would warrant any potential costs.
Completing your lease extension
Finally, the lease will be completed following the agreement of the cost and the terms of the new lease.
As a result, the lease extension should be completed within two months of the terms being agreed upon. However, either the freeholder or the leaseholder can ask for an extension of time. But if the new lease is not completed within four months and the parties have not applied for an extension, the claim is deemed to have been withdrawn. Consequently, you will be unable to make a claim for another year.
Purchase your freehold as a group of leaseholders
Firstly, a Collective Enfranchisement is a way of individual apartment owners (leaseholders) jointly buying and owning the freehold. At least 50% of the apartment owners will need to be eligible for the legal right to be obtained. This includes your leaseholder agreement exceeding 21 years since being first granted, and the block containing at least two apartments or flats.
- Importantly, the leaseholders can extend the length of their leases to increase the value of their property.
- Also, a new lease can resolve any discrepancies within the old leases e.g. poor drafting, and non-compliance with the requirements of the Council of Mortgage Lenders.
- Finally, it gives the leaseholders control of the management of the building and who the Managing Agent is.
What you can expect when instructing Attwells Solicitors
Lease Extension Solicitors
We take the time to simplify property law and to offer practical advice. A lot of our articles have been written based on the personal experience of our team of property solicitors and clients. We hope you find the information useful. If you have an idea for an article, please speak to your conveyancer who will pass on your request.