FAQs for Leasehold Extension (Extending Your Lease)
What and Why?
Leasehold properties are diminishing assets, by extending your lease you receive security of tenure for the long term. This enables you to fully benefit from any rise in the value of your property in the future.
Existing legislation allows you to extend your lease by 90 years in addition to your current unexpired lease term, and simultaneously your annual ground rent will be reduced to a peppercorn. Don’t forget, the shorter your lease, the less valuable it is, and the more you will have to pay to extend your lease. The critical point is 80 years, once your lease term drops below 80 years; the cost to extend your lease rises significantly.
Want some answers? Take a look at the FAQ's below!
1. Do you qualify for a lease extension?
If you’ve owned your flat for over 2 years, you are entitled by law to extend your lease by 90 more years. To clarify, this means 90 years in addition to the number of years remaining on your lease now, with a peppercorn ground rent. The Freeholder is obligated to grant you the lease extension. What you must agree on is the amount of money you will be obligated to pay (the premium).
2. What if I am unable to locate the Freeholder?
If you have made every effort to locate your Freeholder and haven’t succeeded, your solicitor can file an application to the county court requesting a Vesting Order. It is up to you to prove that you made every effort to track your Freeholder down. Once you have proven to the court that you tried your best, you will then be allowed to go to a First Tier Tribunal to obtain your lease extension.
3. What am I obligated for in terms of Legal and Valuation fees?
You are responsible for paying your own legal and valuation fees, as well as the reasonable Freeholder’s valuation and legal fees. However, you are not obligated for the Freeholder’s legal fees for dealing with the court, negotiating the price or applications to the First Tier Tribunal.
4. What will the Price payable be for extending my lease?
The price payable for extending your lease is dependant on a number of variables; some of these include the property’s market value, ground rent, deferment rate, capitalisation rate and the unexpired term of the lease (the premium payable is significantly higher when your lease has fewer than 80 years remaining).
It is important that Leaseholders retain qualified professional Valier’s like Foundation Surveyors who have expertise in this area of the law to offer sound advice on a price prior to serving the Initial Notice. The reason for this is that by law, the price stipulated in the Initial Notice has to be “realistic,” therefore; expert advice must be sought at the outset.