FAQs: Freeholds & Leases
Below are some frequently asked questions which we have over the years received from clients about extending their leases and purchasing the freehold of their buildings which we hope you will find useful.
Q. If our landlord does not want to sell the freehold of our building to us or extend our leases what can we do?
A. Flat owners who qualify under the Leasehold Reform, Housing & Urban Development Act 1993 (the “Act”) have a choice of either obtaining lease extensions or, with their fellow flat owners, buying the freehold of their building. You can therefore effectively force your landlord to do one or the other or even both.
Q. How many years can I extend my existing lease by?
A.The Act provides for an additional 90 years on top of the number of years left to run on a lease. For example if your lease currently has 50 years left to run your lease extension will give you a new 140 year lease.
Q. I have been negotiating a lease extension with my landlord, without serving formal notice on him, for over six months now. My landlord has in principle agreed to extend my lease but wants to increase the ground rent payable from £25 a year to £250 a year. I am very unhappy about this. Is there anything I can I do?
A. If you serve formal notice on your landlord, i.e. pursue a formal lease extension claim, your landlord will not only be forced to agree a price for a new lease as set out within the Act but the ground rent will be reduced to a peppercorn i.e. nil.
Q. I have heard that landlords can inflate prices when extending leases or selling freeholds. What can I do to prevent this?
A. The formula for calculating the price payable is set out within the Act. Therefore if a formal claim for either lease extensions or the freehold of the building is made then the surveyors acting for both the landlord and flat owners will base their calculations on the statutory formula. This should prevent your landlord from overcharging you for a lease extension.
Q. I have been asking my landlord for a lease extension for some time now but am not receiving a reply from him. Is this usual?
A. It is not uncommon for landlords to delay matters since the price payable to them for a lease extension usually increases as the length of a lease gets shorter. This will mean more money for your landlord. On the assumption that you qualify under the Act our advice to you is to serve formal notice on your landlord for a new lease. This will fix the valuation date which means that your landlord cannot ask you for more money at a later date if property values go up. Further your landlord will be obliged to respond to your claim notice failing which you could apply to court to get a lease extension at the lower price as proposed by your surveyor.
Q. I live in a block of flats and my fellow flat owners and I would either like to extend our leases and or buy the freehold of our building but cannot decide which to do. Can you please advise us?
A. If you and your fellow flat owners qualify under the Act you will have a statutory right to extend your individual leases and to purchase the freehold of your building. If you can afford it you should first exercise your collective right to purchase the freehold of your building. Having bought the freehold you should then grant yourselves new 999 year leases at a ground rent of a peppercorn i.e. nil. Each of you will then own a 999 year lease of your flats as well as share of the freehold. This will also give you complete control over how you run your building. If you cannot do both you should at the very least protect your individual position by making a formal claim for a lease extension to stop the rising cost of a lease extension.
Q. What is the advantage of me extending my lease now rather than later?
A. Generally speaking the price payable to extend a lease increases as the length of the lease gets shorter. It will therefore save you money to extend your lease sooner rather than later. Ideally you should aim to serve a claim notice on your landlord before the length of your lease has less than 80 years left to run. This is because once the number of years left on a lease drop below 80 years an additional valuation component known as’ marriage value’ becomes payable to the landlord which can increase the price of a lease extension substantially. Do not worry if your lease has already fallen below the 80 year mark as you can still prevent the cost of a lease extension rising even further by immediately serving notice on your landlord to fix the valuation date. For a demonstration of how the price of a lease extension varies depending on the number of years left to run please use our free online calculator on our website www.moonbeever.com Our calculator will give you an instant indication of the likely price payable to your landlord.
Q. I would really like to either extend my lease or possibly with my fellow flat owners buy the freehold of my building. However I do not think that this will be possible as we have an absentee landlord. Is there anything we can do?
A. Yes, there are set procedures in law for obtaining lease extensions/the freehold of your building where there is a missing landlord. The option most suitable to you will depend upon your individual circumstances.
Q. Can I buy the freehold of my house?
A. The Leasehold Reform Act 1967 is a separate piece of legislation under which, if you qualify, you can purchase the freehold of your house.
Q. I live in a block of flats and some of my fellow flat owners and I would like to get together and buy the freehold of our building. Can you let me know what the position of those flat owners who do not wish to participate in the purchase will be after we have bought the freehold?
A. Those of you who participate in the purchase the freehold of the building will collectively become the freeholder of those who did not. This means that the non-participating flat owners will need to pay a price to their new freeholder, i.e. to those of you who participated in the purchase, to either extend their leases or buy a share of the freehold. There can therefore be an investment value in buying the freehold since the cost of a new lease or a share of the freehold will only increase with time and as joint freeholder you will receive a share of the price of a lease extension or sale of a share of the freehold to a fellow flat owner.
Q. I own the freehold of a house converted into two flats and recently received a section 42 lease extension claim notice from one of the flat owners. Can you please let me know if I really need to respond to this notice?
A. By serving you with a formal notice to extend his/her lease the flat owner has commenced the statutory process which also instigates the statutory timetable. There will now be a number of critical deadlines which you must observe and which could cost you dearly if you don’t. You should obtain legal advice on the matter without further delay.