Many properties, and in particular, flats and maisonettes which were built in the seventies or early eighties are purchased on a long leasehold interest, a large proportion of which originally had a term of 99 years or thereabouts.
As the remaining term gets shorter, and especially when there is less than 60 to 70 years remaining on the lease, the value of the property may become affected. A number of building societies and banks may not be willing to grant mortgages where there is less than 55 to 60 years left on the lease.
The Leasehold Reform Housing and Urban Development Act 1993, as amended by the Commonhold and Leasehold Reform Act 2002 provides, subject to certain qualifying criteria, for the leaseholder to extend their lease, thereby increasing the value of their asset and enhancing the saleability of the property.
Many houses in the 1960’s and 70s were sold on a long leasehold basis, and again subject to certain criteria, the freehold of these properties can be purchased though a legislative procedure.
It is very easy to overlook the age of the leases on one’s property, however, it is essential if your property is 30 or 40 years old that you should (particularly in the latter cases) address the question of either a leasehold extension or purchase of the freehold, as the longer the matter is left, the more expensive the acquisition of the new lease or freehold will be.
Ward and Rider work closely with specialist valuers who are able to advise on the possible purchase of either the leasehold extension or the freehold acquisition.
With regard to flats, before the leasehold reform leaseholders were at the mercy of unscrupulous landlords who took the opportunity to charge high premiums for the extensions and to increase the ground rent. Leaseholders watching their flats devalue had little option but to accept the landlord’s terms. Now with the new legislation the majority of flat owners will be able to extend their lease. There are some legal requirements that must be met, the most significant are, you will need to own a lease with an original term exceeding 21 years and you will have had to have owned the flat for at least two years. Following the successful application to extend your lease you will be entitled to an extension of 90 years on your existing term, a nil ground rent and the premium for the lease extension is calculated out under legislation laid down by the law and the landlord cannot pick a figure out of the air. Most flats within the same building were granted at the same time and flat owners can club together, provided there is a minimum number, to purchase the freehold in the building, and this is known as enfranchisement. To be part of the buying the Freehold at your block, 50% of the flats within your block will need to participate. If you own a flat in a block, but do not live in it, for example you may rent it out or it is your holiday home, you are still able to be a part of the process. Therefore, you can buy a flat one day and become part of the purchase of the freehold process the next.
If you would like to discuss the possibility of extending your lease on your flat or maisonette, or acquiring the freehold of your property where the lease is of an advanced age, please contact Steve Lewis or one of the residential team who would be delighted to assist in connection with your enquiry.
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