Qualifying for a lease extension
Do I qualify for a lease extension?
To qualify for a lease extension you must fulfil the following:
- Own a long lease, i.e. a lease which was originally granted for a term of at least 21 years.
- Owned the property for a minimum of two years. If buying a property, the vendor can serve the Notice of Claim before the sale. This right can then be transferred to the purchaser in the sale.
Do I qualify to buy the freehold of my leasehold house?
- You must own a long lease, i.e. a lease which was originally granted for a term of 21 years or more.
- You must own a qualifying house, being one which is separate and does not lie over or under another property demised to anyone else.
- The leaseholder must have owned their leasehold house for a minimum of two years.
- There is no longer a residence test.
Do I and the other tenants/leaseholders in my building qualify for a collective enfranchisement claim?
- Two-thirds of the flats in the building must be owned by qualifying leaseholders. To be a qualifying leaseholder, one must own a long lease of the flat (21 years +).
- No more than 25% of building’s internal floor area can be in non residential use.
- At least 50% of the qualifying leaseholders have to participate in the purchase of the freehold.
- There must be at least two flats in the building. If there are only two flats, both must be participating leaseholders.
Do I have to pursue a claim through the relevant Act?
- No, you can approach the freeholder and go through the process outside of the Act if the freeholder is willing.
- However, if negotiating outside of the Act, the leaseholder does not have any rights and therefore has no statutory protection. This could result in the freeholder proposing a higher premium or unsatisfactory changes to the lease terms.
Process of lease extension
How long does the enfranchisement process take?
- If proceeding under the Act, the process will usually take between 9 and 12 months if the claim is settled prior to the Tribunal. Going to the Tribunal may add a further 6 months to a year to the process.
- If however, you are able to agree terms to extend your lease or buy the freehold outside of the Act, the process can be considerably quicker.
By how many years can I extend my lease?
- If proceeding with your claim under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended), the lease will be extended by 90 years.
- If extending outside of the Act, you may be able to agree a different length of extension.
I served a notice of claim on my freeholder through my solicitor but the freeholder has not served a Counter Notice. What happens now?
- If you own a flat, then if the freeholder does not serve a Counter Notice, you can acquire the freehold or extend your lease on the terms proposed in the leaseholder’s Notice of Claim. However, the leaseholder’s proposed figure must be realistic, if it is not, the notice could be deemed invalid.
- If you own a house, then in the absence of a counter-notice you will have to apply to the Court for a declaration that the claim and Notice are valid. If the landlord is absent, then the matter may be referred to a valuation tribunal for a determination on the premium.
Costs of a lease extension of enfranchisement
How much will I have to pay to extend my lease or buy the freehold of my leasehold house?
- The premium will vary for every property. It will depend on the freehold value of the property, the number of years remaining on the lease and the level of ground rents being paid now and due to be paid in the future.
- The difference between the amount that you would pay to extend your lease by the statutory 90 years and the amount you would pay to buy the freehold is minimal, i.e. 1-2%.
- We would advise you seek a professional valuation by someone like us who carries out valuations under the Leasehold Reform legislation on a regular basis.
How do valuers calculate the premium payable?
- Capitalise the current and future ground rents payable to the landlord until the end of the lease.
- Determine the value of the deferred reversionary interest, i.e. what someone would pay today to receive the empty property at the end of the lease.
- Assess the amount of marriage value payable
Other than the premium, are there other costs that I will have to pay?
- If you instruct a surveyor and a solicitor to act for you, their fees will have to be paid.
- The leaseholder is also responsible for the freeholder’s ‘reasonable costs’. This includes the freeholder’s professional fees incurred in valuing the premium, processing the Initial Notice and serving Counter Notice and drafting the new lease (if appropriate).
- However, a leaseholder is not liable for the freeholder’s costs incurred in negotiating the premium, nor any costs incurred in preparing for, and attending a Tribunal.
Solicitors for lease extension
The process involved in extending your lease, enfranchising your house and purchasing the freehold of your block of flats can be complex and we would always recommend that a specialist solicitor acts on your behalf in conjunction with us to create a strong team.
We have listed below solicitors that we act with on a regular basis and who are experts in enfranchisement claims.
Other lease extension questions
If I extend my lease, will the ground rents remain the same?
If you extend your lease under the Act, the ground rent will become a ‘peppercorn’ rent until the end of the lease term, i.e. nil.
I cannot afford to buy the freehold, will a lease extension be cheaper?
The difference in price between acquiring the freehold and extending your lease is so small that it is unlikely to make it unaffordable. The difference is usually between 1 and 2%.
I want to buy the freehold of my house but I cannot find the freeholder, how can I go about proceeding with my claim?
The Leasehold Reform Act 1967 enables you to apply to the County Court to buy the freehold if the freeholder cannot be found. You must show however, that all reasonable attempts have been made to find the freeholder.