L_Legal

Legal Background

Unfortunately your lease is a wasting asset and, even though it was probably granted initially for a period of 99 or even 125 years, as time passes the reduced term of your lease will begin to have an adverse effect on the value and saleability of your property.

When the lease reduces to 70 to 75 years remaining you will find that it starts to get more difficult to obtain a mortgage on the property and harder to sell the property for its full value.

Previously leaseholders were effectively at the mercy of freeholders who could charge anything they liked to extend the lease.

However, in 1993 the Leasehold Reform act became law and now, provided that you have owned your property for two years or more, you are entitled to apply for and obtain an extension to your lease whether or not the freeholder wants to grant one.

If you apply for an extension under the 1993 act you can:-

  • Extend your lease by 90 years, so that if you have 60 years left on your lease you will obtain a new 150 year lease;
  • Stop paying ground rent, which is reduced to zero in the new lease;
  • Have the price you pay to the freeholder fixed by the leasehold valuation tribunal if you think the freeholder is asking too much.

The process involved in obtaining the lease extension varies according to the stance taken by the freeholder. If the freeholder is reasonable, you may be able to agree a price amicably so that the transaction can proceed readily without any great formality.

However, if your freeholder is not cooperative, then you will need to serve legal notices on the freeholder to start the formal extension process and then comply with strict timetables for the exchange of legal information and valuations with the freeholder. If no agreement is reached in negotiation it will be necessary for your adviser to attend the Leasehold Valuation Tribunal who will fix the price to be paid.

Once a price is agreed the new lease needs to be approved legally and registered at the Land Registry.