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Lease Extensions

The Leasehold Reform Housing and Urban Development Act 1993 entitles qualifying Leaseholders to extend their Lease.

 

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Over the last ten to fifteen years Building Societies and Banks have become much more prescriptive with regard to the length of Leases they will accept for Mortgage security, and this has had an effect of reducing the Value of short Lease properties. Ideally the Lease should be extended when there is at least eighty years on the existing Lease to run.

Where Leasehold properties have an unexpired term of 90 years or less, the value of the Lease incrementally decreases and once the term dips below 80 years, it becomes significantly more expensive to extend the Lease and the property may prove difficult to sell.

If you are buying a Leasehold property with less than 90 years remaining, whilst it might be a good investment at a correctly negotiated price, you will need to take into consideration the cost of extension.

There is only a right to extend the Lease if you have been the registered owner for 2 years. If, however, the Vendor is a qualifying tenant, they can serve a Section 42 Notice and transfer this with the sale so you do not need to wait the 2 years.

Process

  • You will need to instruct a Surveyor to carry out a Valuation. A copy will be provided to the Solicitor acting on your behalf.
  • The Solicitor will serve a Section 42 Notice on your behalf. This Notice will include the proposed premium you are offering to the Freeholder.
  • The Freeholder has a maximum of two months to respond to the Notice. Usually the Freeholder will reject the premium offered and will make a counter-offer.
  • It is then usual for negotiations to commence between the Surveyors acting for the Leaseholder and Freeholder.
  • If a premium is not agreed within a six month period from the Section 42 Notice an application can be made to the First Tier Tribunal to determine the premium.
  • If terms are agreed there is a four month period to complete the process.

Services for Leaseholders

The Leasehold Reform Housing and Urban Development Act 1993 entitles qualifying Leaseholders to extend their Lease by a term of 90 years with the Ground Rent reverting to a Peppercorn.

You will quality if you have owned the property for more than two years and the original Lease length is in excess of twenty one years. There are certain exceptions relating to Charitable Housing Trusts etc.

Services for Freeholders

You may have been approached by one of your Leaseholders to extend their Lease. Your Legal Advisers will need to respond to the Section 42 Notice within the required time frame. We are able to undertake a Valuation and negotiate on your behalf to achieve the best deal.