How to avoid the pitfalls in lease extension
Nearly one in five of all properties in England is leasehold, with around 3 million flats and 1.4 million new-build houses being owned in this way.
As many leasehold flats date from the building booms of the last century, their owners are becoming aware that it’s time to negotiate an extension, especially once the remaining years on the lease dip beneath the important 80-year mark.
Extending a lease can be complex, so you’ll need professional help from the outset to ensure every step of the process is correctly completed. We’ll be able to guide you through the legal formalities and we can recommend an expert valuer who will help calculate the price.
Don’t let your lease dip too low
Having a lease of less than 80 years will seriously impact the value of your property. We can’t stress enough that you need to act promptly. If you don’t, you’ll see the value of your property start to decline sharply, and in the meantime the cost of renewing the lease will steadily increase as the outstanding term of the lease decreases.
Selling a property with a short lease can be a problem, as many lenders won’t grant mortgages on properties with fewer than 70 years remaining.
Make sure you’re eligible
In order to qualify for an extension, the original lease must have been for a term of not less than 21 years from the date of the grant, and the property owner must have owned it for at least two years.
Choose the right route
In some instances, the freeholder may be willing to discuss extending your lease without you needing to serve a formal notice. The downside to this approach is that the freeholder’s offer could be as little as 99 years in total, you may have to continue to pay ground rent, and the freeholder may want to make changes to the terms of the lease.
If you choose to apply for an extension under the Leasehold Reform, Housing and Urban Development Act 1993, then you will be entitled to a term that expires 90 years after the termination date of the original lease, at what is quaintly referred to as a ‘peppercorn rent’, which means in plain English, no ground rent.
At this point, we can give you advice you’ll need to help you weigh up your options.
Get the correct valuation
The Act provides a framework which should result in the leaseholder paying a fair price for their extension. You’ll need advice from a Chartered Surveyor who specialises in this area. They will provide you with a valuation figure that can be used in your section 42 Notice, the paperwork that triggers negotiations with the freeholder.
Complete the paperwork and stick to the timetable
The negotiation process has to be carried out strictly in line with the procedures set out in the Act, which means ensuring all the relevant information has been provided, and everything is accomplished within the statutory timeframe.
Failing to get the paperwork right, or missing a deadline means that under the legislation, you must wait for another 12 months before starting the process all over again. Meanwhile, the value of the lease will rise, and you’ll end up paying more, so this is one of the major pitfalls we’ll help you avoid.
Be prepared for negotiations
You can expect the freeholder to make a higher counter offer, and we’ll negotiate on your behalf. If that doesn’t work, we’ll go to what’s called the First-Tier Tribunal, the arbiter of lease disputes.
Here to help
We’ll be on hand from start to finish to help guide you through this complex, but ultimately rewarding process. So, if you’d like to know more, contact Salvatore Amico on 0203 871 0039 or Salvatore firstname.lastname@example.org