Ownership of a leasehold property brings with it numerous other considerations that simply do not apply to freehold ownership. These include rights, obligations and restrictions in the form of covenants but perhaps one of the most important is the length of the lease itself. Leases were typically granted for terms of 99 or 125 years, especially in the 1970s and 1980s when a large quantity of leasehold property came onto the market.
Buyers in the marketplace are increasingly seeing sub 100 year leases as short despite that being well above the point where marriage value becomes a factor (80 years). Obtaining a mortgage is also becoming increasingly difficult with short lease property and that further affects salability.
Even if you are not planning to sell your flat in the near future the very fact that the lease is getting shorter makes it a depreciating asset. Thankfully the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) gives leasehold owners the right to a 90 year extension whilst at the same time reducing the ground rent to zero.
There are certain qualifying criteria that must be met to gain the right to invoke the Act and serve a Section 42 notice; the requirement to have owned the property for 2 years being the most common and relevant. This can be circumvented in the case of a sale (where the incoming purchaser would normally be locked out for a further 2 years) by the current vendor serving and assigning the right of extension. This side of proceedings is the responsibility of a solicitor.
The valuation aspect of the claim and the determination of what should reasonably be paid to extend a lease falls to an expert Chartered Surveyor. At Carter Fielding we have surveyors who are suitably qualified in this area of work and who can draw on many years’ experience from simple amicable claims through to attendance at Tribunal including informal claims where a S42 notice has not been served.
The 1993 Act also allows leaseholders to collectively enfranchise, that is to buy the freehold of their building from their freeholder. Again, certain qualifying criteria applies, but in this case there is no 2 year ownership rule and a claim can usually proceed if 50% of the leaseholders are willing to participate.
A much less frequently used method of acquisition is Part III of the Landlord and Tenant Act 1987 (the 1987 Act). The ability to qualify is reasonably complex and would normally have to be verified by a solicitor, but the basic criteria is that if the freeholder is absent and has let the building fall into disrepair. In that scenario leaseholders can force the sale of the freehold, often at a greatly reduced rate, through a claim under the 1987 Act. The savings are further enhanced by the fact that the leaseholder’s costs are offset against the final premium payable.
Our surveyors have experience in acting for both leaseholders and freeholders and work closely with a select number of equally experienced solicitors giving us a unique insight in to the process as well as an understanding of the tricks and tips necessary to bring a claim to a successful conclusion.
As an alternative to a lease extension, leaseholders in a block can acquire the freehold in what is technically known as enfranchisement (as a rule this is more than 50% participation).READ MORE >>
The Leasehold Reform, Housing and Urban Development Act 1993 (as amended) gives flat owners the right to a lease extension of 90 years on top of the current lease, and a reduction of their ground rent to a peppercorn.READ MORE >>
When flat owners find themselves with a missing freeholder it can cause real problems. The freeholder will typically be responsible for insuring the building as well as organising external maintenance and repairs.READ MORE >>