We have a specialist team providing a range of legal services to commercial and private clients, including leasehold enfranchisement. We know value for money is important so, we pride ourselves on top level services at a fair price. We work to provide certainty by, wherever possible, agreeing a fixed fee upfront.
Our services include:
- Buying leasehold properties
- Preparing Deeds of covenant
- Dealing with Licences
- Supplementary lease work
- Landlords selling freehold to leaseholders
If you need help our specialists will assist Guy Osborn and Amber Larner-Bird
Leasehold Extensions and Leasehold Enfranchisement Explained
The law gives leaseholders of residential property two distinct rights firstly the right, together with their fellow leaseholders to acquire the Freehold of the property and secondly the right to extend the Term of their leases.
If you purchase a leasehold property you do so for a fixed period that is stipulated in the lease, this is known as the “Term”. When the Term ends, the ownership of your property reverts to the landlord.
The remaining Term of a lease affects the value of the property: the shorter the lease, the less the property is worth. So, it is in your interest to either extend the Term of the lease or acquire the freehold before.
The Relevant Law
The Leasehold Reform Act of 1967 recognised the problems faced by those who owned leasehold houses and were anticipating the end of their lease term. The Act gives leaseholders the right to purchase their houses and acquire the freehold from their landlords, at a price that is fair and reasonable to both parties.
The later Leasehold Reform, Housing and Urban Development Act of 1993 gave flat owners the right to extend their lease or buy the freehold.
Additional reforms, such as the 2002 Commonhold and Leasehold Reform Act awarded extended the existing rights and introduced a new Right to Manage .
The government is due to shortly issue a White Paper that is anticipated to propose further reforms to make the process easier for leaseholders
Leasehold Enfranchisement & Extension Valuation Process
How much does the leasehold enfranchisement process cost? The valuation process is rather complex and depends on a host of factors and should be carried out by a specialist valuer. Once you have your valuation your lawyer will prepare a form of notice for service on your landlord which will get the process underway. What follows entails the receipt of counter notices and thereafter negotiation and agreement of terms, all of which have prescribed deadlines. For this reason, it is a good idea to find professionals who are experienced in this area of work, starting with a specialist solicitor and a valuation surveyor. They will work for you to ensure you get the best terms possible.
FREQUENTLY ASKED QUESTIONS
Does a landlord have to extend a lease?
There are two options when extending a lease – a voluntary agreement with your freeholder(s) or a statutory lease extension where you rely on the right to be able to extend your lease granted in the Leasehold Reform, Housing and Urban Development Act 1993.
A voluntary lease extension – involves you coming to an agreement with your freeholder in regards to the term and premium for extending your lease. There are no set terms the freeholder has to give you and their terms do not have to be “fair and reasonable”. In your circumstances your freeholder may not be unreasonable or difficult to deal with. In most circumstances we usually advise that it is worth at least trying to agree terms voluntarily as it does often save money in terms of legal costs, however it is also important to make sure you are getting a “good deal” and not being pushed pay over the odds for your lease extension. We would highlight that freeholders do not have to grant voluntary lease extension and a freeholder may simply say “no” or advise you to extend by serving a notice under the 1993 Act.
A statutory lease extension – as long as you have owned a property for over two years you have the right to extend your lease by 90 years and reduce your ground rent to £nil. As long as you meet the criteria for extending under the 1993 Act a freeholder must grant you a lease on 1993 Act terms.
Can my landlord refuse to extend a lease?
A landlord does not have to extend your lease on a voluntary basis (although they may agree to do so so it is usually best to at least approach your freeholder to make some initial enquiries). However as long as you meet the criteria for extending under the Leasehold Reform, Housing and Urban Development Act 1993 your landlord cannot refuse to extend your lease.
What is the process for extending my lease?
If you proceed with a voluntary lease extension then the process is likely to be set by the freeholders themselves. When agreeing the terms of the lease extension you may be asked to cover the costs of the freeholders valuation. Once the premium and terms of the extension are agreed the process involves a lease extension deed being drafted, checked, negotiated and completed. After completion your lease extensions solicitors will also register the lease extension at Land Registry. If you have a mortgage over your property the lenders consent will be required and a lease extension solicitor will be needed to act on the lenders behalf.
If you proceed with a statutory lease extension then the process is more involved. Initially a section 42 notice will be served on the freehold which notifies them that you are relying on your right to seek a lease extension. The section 42 notice will provide an opening offer on the premium payable for the extended term. The freeholders then have a period of two months to serve a counter notice which will either admit or not admit your right to extend the lease and will either accept the offer made in the section 42 notice or propose a counter offer for a higher premium. There is then a period of 6 months to negotiate the premium and the terms of the new lease before a property tribunal application would need to be made. Once the premium and terms of the lease are agreed then the lease is completed and registered at Land Registry.
How long will the leasehold enfranchisement process take?
This is very dependent on whether the extension is a voluntary or statutory lease extension. With voluntary extensions there are no set deadlines and therefore the length is associated with how quickly the freeholders want to proceed with the extension. Once the premium and terms of a voluntary lease extension are agreed it should complete in around 1-6 months. A statutory extension is more likely to take around 12 months as the process is more involved however there are set deadlines so process cannot be “stalled” by either party.
I own a leasehold, can I buy the freehold? If so how do I buy the freehold?
If you own a leasehold property you may be entitled to collective enfranchise under the Leasehold Reform, Housing and Urban Development Act 1993. The 1993 Act gives the rights for leaseholders as a group to acquire the freehold of the building of which their flats form part. The following three criteria must initially be met in order for you to collectively enfranchise:
o At least two thirds of the flats in the building must be owned by qualifying leaseholders. To be a qualifying leaseholder you must have a lease that was originally granted for at least 21 years and you must not own more than 2 flats in the building.
o The building must be a self contained building or part of one and be divisible vertically from the other parts. There must be at least two flats in the building and two-thirds of them must be held by a qualifying tenant. The building must contain no more than 25% commercial floor area.
o At least half of qualifying leaseholders must give notice of their wish to acquire the freehold interest
If you would like to discuss collective enfranchisement further please call 020 7485 8811 and ask for Guy Osborn or Amber Larner-Bird
Is the lease extension process different if I already own a share of the freehold?
As freeholders you are able to extend your leases out of the freehold to 999 years. The procedure involves a deed being drafted, agreed, signed by each leaseholder and director of the freehold company/each freeholder if the freehold is held in your names and then registered at land registry. If you are looking to extend your lease as a freeholder or co-freeholder you should extend discussing your leases as a group as in practice you usually require each other’s consent and signatures.
Where can I obtain a copy of my lease?
If you need a copy lease and you have a mortgage on your property a copy can usually be obtained from your mortgage lender. Your freeholder may also have a copy of your lease and be able to provide you with this.
Alternatively the Land Registry will hold a copy although a fee will be payable, please visit http://www.landregistry.gov.uk/.
Osbornes Law is proud to be a founding member of the Association of Leasehold Enfranchisement Practitioners and features in the News on the Block experts directory.
For further information on extending your lease, buying the freehold or exercising your right to manage call Guy Osborn or Shilpa Mathuradas on 020 7485 8811. They will be happy to answer your questions.