Lease Extensions
Lease extensions
Increasingly commonly, extending a residential lease is an issue for leaseholders, particularly if they are planning to sell in the near future, having owned for some years. Whilst not strictly always necessary to extend a lease, it is becoming more common for leases with 80 years or more remaining to also be extended. The right to extend a lease is, subject to qualifying criteria and correct use of procedure, a statutory right to extend by 90 years. However, it is common for extensions to ultimately be agreed by consent with the freeholder as it is generally in neither leaseholder or freeholder’s interests to have the matter adjudicated by the Leasehold Valuation Tribunal.
Our solicitors are able to assist residential flat owners who have long leases to extend their leases with the freehold owner of the property. This area of the law is highly technical and can creates complex legal and valuation issues.
The Leasehold Reform Act 1993 allows leases to be extended for a period of up to 90 years. The benefits of extending a lease result in having a more economically valuable.
Why extend ?
The shorter the length of your unexpired lease the less in value it becomes (as technically at the end of your lease you need to vacate the property). If you own a lease which has more than 100 years running on it before it expires then in practical terms, you will have no issue finding potential buyers. However if you are trying to sell your flat it may be difficult to do so if the unexpired term is less than 60 years since mortgage lenders will not consider it to be good security for a loan, and this is a key issue, which means they will not lend to potential buyers against the property.
The other key issue is that the cost of extending (the premium) rises significantly once a lease drops below 80 years.
Not all leases qualify to an automatic extension. There are qualifying criteria which need to be met as well as exceptions that may stop qualification. In order for your lease to be eligible it must meet certain minimum requirements. These are that the lease is a long lease and that you have been in possession of it for more than two years. Leases that are not eligible include those running on a building which is on national trust property, has a cathedral precinct or is a Crown property.
For a successful application to extend your lease you are advised to appoint both a Valuer and a Solicitor. It is important to get a valuer as you will need to pay to the landlord money in order to extend the lease. How much money you will need to pay really depends on how long is left until the expiration of the lease and how much value will be created to the property by extending the lease. A professional valuer can advise on all these points.
Once the assignment of the application has been registered the leaseholder can serve the notice and sell the flat with the benefit of the application.
Our solicitors will be able to inform you, in simple terms, the legal requirements which need to be complied with in order for the new lease to be granted and guide you through the whole process. We will also determine whether this is a commercially attractive strategy for you to take. If you require further assistance or information on the lease extension process then please contact us.