KNOWING YOUR RIGHTS AS A LEASEHOLDER – AND UNDERSTANDING HOW TO MAKE THEM WORK TO YOUR ADVANTAGE – IS VITAL IF YOU WANT TO KEEP COSTS TO A MINIMUM AND HAVE PEACE OF MIND.
As a leaseholder you own your property for a set period of time which is specified in your lease agreement. The lease period is usually a long one, typically running for between 90 and 120 years, although it may be as long as 999 years and as short as 40.
Should the time come when you want to extend your lease, you will either need to go through a process known as leasehold enfranchisement or purchase a share of the freehold, also known as collective enfranchisement.
Negotiating a lease extension can be complicated and it’s important to ensure you get a deal that’s in your best financial interests, which is why it pays to use a specialist solicitor to act on your behalf.
Once a lease has between 85 and 90 years left to run, it’s worth considering negotiating an extension since its value is higher the longer it has left to run.
Not acting in a timely fashion also risks the lease falling to below 80 years, at which point it extending it becomes more expensive due to additional costs that are included in the formula used to calculate the extension premium. These are known as ‘marriage value’.
Once you have established that your landlord is willing to grant a lease extension, it’s wise for the leaseholder to appoint a valuation surveyor and a solicitor to ensure the proposed premium of the lease extension is fair and that the extension formalities are carried out properly.
The Government has introduced legislation to protect qualifying leaseholders from the risks associated with short leases and the law now gives them the right to extend their lease or buy the freehold.
However, the length of time by which a lease may be extended under this legislation differs depending on the type of property involved. Typically, you may be able to extend the lease on a flat by 90 years, but on a house by only 50 years.
DO YOU QUALIFY FOR THE RIGHT TO EXTEND UNDER LAW?
If you’ve had the lease for two years or more and it was originally a long lease of 21 years or more, the likelihood is you qualify for the right to extend, although you should check to make sure.
The factors that are generally considered to determine how much you should pay to extend the lease are the value of the property, the remaining years left on the lease and the annual ground rent.
OTHER CONSIDERATIONS
There are additional things you will need to think about when entering into a lease enfranchisement process. These relate to the legal and valuation costs you’ll incur, whether you will have to pay ground rent and the strict timetable that both parties must stick to.
Our experienced property solicitors will be able to give you valuable advice and support in considering all the factors relating to your lease extension to help you to achieve an outcome that’s in your best interests.
For more information or to speak to one of our property solicitors in London about a lease extension, please get in touch with us. Our offices are based in Whetstone, North London and Chancery Lane, Central London (by appointment only).
