What leaseholders ask...
What is the difference between extending a lease and buying the freehold?
The short answer is: not a lot in value terms, unless there is some development potential.
Other not wholly financial considerations include being able to organise your own insurance and repairs (but if you own the freehold you will have to organise this!).
What is the difference between a 999 year lease and a 125 year lease?
There is negligible difference between the two in value terms, simply because £1 in 125 years time is worth very little.
How does the process of extending the lease of a flat work?
The process for the majority of lease extensions is fairly straightforward:
(i) get some valuation advice.
(ii) if there is a relationship with the freeholder, make an informal approach initially to see if an agreement can be reached without having to serve a notice (this would save some legal fees).
(iii) if the informal approach doesn’t work after a short period of time serve a statutory notice (a "Section 42 Notice")
(iv) the freeholder will (in most cases) appoint a valuer. It is the leaseholder's responsibility to pay for the freeholder's valuation advice.
(v) if a notice has been served the freeholder will serve a counter-notice (a "Section 45 Notice").
(vi) the two valuers will negotiate (or the leaseholder will negotiate directly with the landlord / landlord’s valuer).
(vii) an agreement will be reached.
(viii) the solicitors will conclude the legal matters.
Where an agreement cannot be reached between the two valuers, the matter has to be decided by the Leasehold Valuation Tribunal, usually at considerable extra expense for both the landlord and the leaseholder. As a result of this extra expense (and the uncertainty about what the tribunal will decide) the majority of lease extensions tend to be settled by agreement. Depending on the numbers involved, it is often in both parties interest to settle instead of leaving the case to be settled by tribunal.
while the process is fairly straightforward (i) the notices must be valid - it is therefore essential to use a solicitor familiar with the service of these notices and (ii) the time-limits must be strictly adhered to.
What happens where there is an absentee freeholder?
In some cases, notably where there is an absentee freeholder, the process is much more time-consuming: a notice has to be served on the freeholder at its last known address, the leaseholder has to demonstrate that all efforts have been made to find the address of the freeholder, an application is made to the County Court which will usually direct that the matter be decided by the Leasehold Valuation Tribunal. The leaseholder's valuer will therefore have to prepare an expert witness report and once the tribunal has decided on the premium to be paid the Court will, effectively, grant the lease extension in the place of the freeholder.
Can a lease be extended back to just 99 or 125 years?
The answer is yes; it is referred to in the trade as a lease extension 'outside the Act'. Provided the premium paid is reasonable this can produce a good result for both the leaseholder and the freeholder.Why is it good for the leaseholder?
Because it means a lower premium will be payable. This is because (i) a term of 99 years will in almost all cases result in a term which is less than you would have compared to the statutory basis where the existing term is extended by 90 years to (e.g. a 72 year unexpired terms becomes 162 years), and (ii) because a lease extension 'outside the Act' can incorporate a ground rent, which because it is of value to the freeholder, and marginally reduces the value of the long leasehold interest, reduces the premium payable.
It is also marginally cheaper because a formal notice does not have to be served.Why is it good for the freeholder?
A freeholder quite often prefers this sort of lease extension because it means the 'reversionary' interest i.e. the interest at the expiry of the lease is not so far away, and because the ground rent can, and usually is, increased on this basis giving the freeholder a boost in income. This is more attractive especially when the present ground rent is at a level where the costs of collecting are arguably greater.
When negotiating, please remember that the only lease extension that you are able to force the freeholder to agree to through legal process is the one which extends your existing lease by 90 years.
Who is responsible for getting the valuation advice: the freeholder / landlord or the leaseholder / flat owner?
Usually, both sides get their own valuation advice - that is just what seems to happen. However, there is nothing to stop a leaseholder from approaching a landlord and agreeing that both parties will agree to pay a premium based on one valuer's advice. This would mean the valuer (us) would need to be jointly appointed by both parties.
How soon can I apply to the Leasehold Valuation Tribunal if I feel the landlord is being unreasonable and that a negotiated settlement won't be possible?
The earliest this can be done is two months after the freeholder's counter-notice is served. The latest it can be done is six months after the date the counter-notice is served.
Can the valuation report be sent by email and post?
Yes, our reports are sent by both methods.
What do I do if I want to buy a flat with a short lease?
You have three options:
Get the current owner to extend the lease prior to buying the flat - this may take some time, but it is the 'safest' route.
Get the current owner to serve a statutory notice to extend the lease and assign the benefit of this to you at the same time as the purchase of the flat completes - this means that you can 'take over' the position of the existing leaseholder so you don't have to wait two years before being able to extend the lease. This route is less common because of the uncertainty about how much it will cost. This uncertainty can be greatly reduced by getting professional advice on what the correct premium to pay for extending the lease is.
Buy the existing leasehold interest and wait two years before serving a notice to extend the lease - this is the period of time you have to have owned a flat before being able to serve a statutory notice. A lease extension can be agree before this time period elapses but there is no obligation on the freeholder to grant one unless a statutory notice has been served.
How much should I pay to extend the lease or buy the freehold?
The cost of extending your lease depends on the value of the flat and the number of years left to run on the lease.
The cost of buying the freehold depends on these factors plus any development potential.
You are likely to need two sorts of advice: valuation and legal.
For the valuation advice which we provide, prices for the initial inspection and report start at £400 for a lease extension report and £500 for a freehold purchase report.
Subsequent negotiations are charged on an hourly rate basis. For a lease extension, it usually takes 1-3 hours to negotiate a deal with your landlord or their surveyor, and 2-5 hours for a freehold purchase. Complicating factors, or an unreasonable Landlord can add to this. We have an excellent track record of negotiating down premiums proposed by landlords.
In the case of the matter being referred to a tribunal (because the freeholder and leaseholder cannot reach agreement), these costs are also based on an hourly rate. These costs are difficult to estimate because they will vary dependent on the extent of the differences e.g. if the difference between the freeholder and the leaseholder(s) just relates to relativity, the time involvement will be considerably less than if the differences involve, values, development value and appurtenant land.
You should contact a solicitor to find out how much they will charge to serve the notice and prepare the paperwork.
How long does it take to extend my lease or to buy the freehold?
To extend a lease, 2-3 months where the two parties have reasonable expectations, although it is possible to do it much more quickly when the freeholder and leaseholder are on good terms. If the matter cannot be agreed by negotiation and is referred to the Leasehold Valuation Tribunal it could take around a year.
To buy the freehold, 4-8 months where the two parties have reasonable expectations. If the matter cannot be agreed by negotiation and is referred to the Leasehold Valuation Tribunal it is likely to take more than a year.
The lease of my commercial property is expiring soon - how do I extend this?
Extend Now does not deal with commercial property lease extensions, but Gilmartin Ley (of which Extend Now is a part) does. You can contact Gilmartin Ley by telephone 020 8882 0111 or at email@example.com.
If you have any other questions please ask us!