RICS CHARTERED SURVEYORS SPECIALISING IN COMPULSORY PURCHASE FOR HOMEOWNERS AND BUSINESSES

Frequently Asked Questions 

What is a Lease Extention? 

The Leasehold Reform, Housing and Urban Development Act 1993 (as amended) enables qualifying leaseholders the right to a lease extension.

Am I a qualifing tenant for Lease extension?

  • You must be the registered Leaseholder (known as a tenant) of the flat for two years before the date of the claim.
  • You do not need to be an occupier of the flat.
  • You must hold a lease that had a fixed term of more than 21 years when it was originally granted.
  • Personal representatives of a deceased tenant can make a claim provided that the right is exercised within a period of two years from the date of grant of probate.
  • The assignee of a tenant’s notice served by a tenant who has for the previous two years been a qualifying tenant of the flat also qualifies.
  • There is no limit to the number of flats you may own in the building.
  • You may extend any or all of them.
  • You cannot be a qualifying tenant if you hold a business lease, lease from a charitable trust, a sub-lease which is in breach of terms of a superior lease.

 

What will I receive if I extend my Lease?

  • You will be entitled to acquire a new extended lease in substitution for your existing lease.
  • The extended lease will be for a term expiring 90 years after the end of the current lease.
  • You will reserve a peppercorn rent throughout the term.
  • Broadly, the lease will otherwise be on the same terms as the existing lease.

How much does it cost to extend my Lease?

  • The Price or Premium to be paid for the new lease will be the aggregate of:
  • The diminution in value of the landlord’s interest in the flat, consequent on the grant of the extended lease; being the
  • Capitalised value of the landlord’s ground rent.The value of the landlord’s reversion (this is the near-freehold vacant possession value today, deferred for the unexpired lease term)
  • 50% of the marriage value (the additional value released by the tenant’s ability to merge the extended lease with the existing lease) must be paid to the landlord although the marriage value will be deemed to be nil if the existing lease has an unexpired term of more than 80 years at the date of the claim;
  • Compensation for loss in value of other property owned by the freeholder, including development value.In addition to the price and the tenant’s own legal costs and valuation fees, you will also be required to reimburse the freeholder his legal costs and valuation fees.

What are the steps involved to extend my Lease? 

  • At the outset of the process it is important that you instruct a properly qualified surveyor and solicitor with experience in the field of enfranchisement.
  • If necessary, your solicitor may serve a preliminary notice to obtain information from the Landlord.
  • Your surveyor will inspect the flat and undertake a valuation in order to determine the premium payable.
  • Thereafter, your solicitor serves the tenants notice of claim.
  • The landlord is likely to respond with a procedural notice requiring payment of a deposit (equal to 10% of the premium being offered) and asking the tenant to deduce title.
  • The landlord will instruct his surveyor to inspect the flat and undertake a valuation in order to determine the Premium on behalf of the freeholder.
  • Within the period specified in the tenant’s notice, the landlord must serve his counter-notice. First and foremost, this must state whether or not the claim is admitted.
  • If the claim is admitted, then the counter-notice must state, amongst other things: which of the proposals contained in the tenant’s notice are acceptable or not and the landlord’s counter-proposals – particularly the premium.
  • Once the counter notice is received both sides surveyors will aim negotiate a settlement for the premium which is agreeable to both leasesholders and freeholder.
  • If any terms of acquisition (including the price) remain in dispute after two months following the date of the counter-notice, then either party can apply to the First Tier Tribunal for the matter in dispute to be determined.

 

Please feel free to contact Olden Property Consulting to discuss any market valuation report you need.

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