Frequently Asked Questions
Lease Extension and Enfranchisement.
Below are some Frequently Asked Questions in relation to lease extension and enfranchisement, split between General Questions - Lease Extension and Enfranchisement; Questions - Lease Extensions of Flats; Questions - Enfranchisement of Blocks of Flats; and Questions - Enfranchisement of Houses:
General Questions - Lease Extension and Enfranchisement.
Below are some Frequently Asked General Questions relating to Lease Extensions and Enfranchisement of Blocks of Flats under the Leasehold Reform, Housing and Urban Development Act 1993, or on a voluntary basis; and the Enfranchisement of Houses under the Leasehold Reform Act 1967, or on a voluntary basis; and the answers:
Answer: The proportion of the value of a property held on a lease reduces with time as compared to its value on a 999 year lease with share of freehold. It can also become more difficult to sell the shorter the lease, particularly if it is so short as to make it difficult for purchasers to obtain mortgage finance. By extending a lease or enfranchising, lessees protect themselves against the erosion in the value of their asset.
Answer: You should appoint a valuer and solicitor experienced in dealing with this specialised area of property valuation and law as it is complex and constantly evolving. Failure to comply with the statutory deadlines can often lead to a Deemed Withdrawal of a Claim.
Questions - Lease Extensions of Flats.
Below are some Frequently Asked Questions relating to Lease Extensions of Flats under the Leasehold Reform, Housing and Urban Development Act 1993, or on a voluntary basis; and the answers:
Answer: In return for the payment of a premium, and subject to satisfying the qualifying criteria, leaseholders are able to extend the lease of their flats by 90 years at a peppercorn rent under the Leasehold Reform, Housing and Urban Development Act 1993.
Answer: In order for the lease of a flat to be extended on a statutory basis, it is necessary for the original term to have been for in excess of 21 years, not be a business tenancy, and for the lessee to have owned the flat (from the date of Registration) for more than two years before the date of a Claim to extend. It is possible, when a flat is sold, for the Vendor to serve Notice of Claim, and to Assign the Benefit of the Notice to the Purchaser.
Answer: There is no limit to the number of flats that a lessee can own in a particular building. They can extend the leases of any or all of them, provided the qualifying criteria is met.
Answer: It is possible for the personal representative of a deceased leaseholder to make a claim, provided they do so, within two years from the date of grant of probate.
Answer: If a lessee satisfies the qualifying criteria, they are entitled to acquire a lease that is for a term of 90 years longer than the existing lease, at a peppercorn rent throughout the term of the new lease. The lease will otherwise be on the same terms as the existing lease, except for certain variations that are permitted.
Answer: We will be able to inspect and measure the flat, calculate the floor areas, read and interpret documents, undertake comparable research, and report on the likely premium, and figures for the Notice of Claim if acting for a lessee, or for the Counter-Notice, if acting for the Competent Landlord.
Answer: We are able to act on your behalf to negotiate the premium. If negotiations do not result in a satisfactory outcome, we provide a Cost Benefit Analyses to advise whether it makes sense to proceed with a hearing in the First Tier Tribunal (Property Chamber), or if the case is subsequently appealed, in the Upper Tribunal (Lands Chamber).
If a decision is taken to proceed with a hearing in the First Tier Tribunal (Property Chamber), or in the Upper Tribunal (Lands Chamber), we prepare and give Expert Evidence at the hearing, after which the tribunal will issue their determination.
Answer: After the tenant's valuer has inspected the flat, and reported, and the Notice of Claim has been served, it normally takes between six and fourteen months for the lease to be completed. Negotiating the premium and terms of the extended lease is part of that process. The premium is calculated at the valuation date, which is the date the Notice of Claim is received by the Competent Landlord. If the matter proceeds with a hearing in the First Tier Tribunal (Property Chamber) the process will take longer.
Answer: The premium comprises the diminution in the value of the interests in the flat of the Competent Landlord, and any intermediate landlords as a result of the extension (loss of ground rent, and deferment of the reversion); 50% of the marriage value arising, if the lease currently has less than 80 years unexpired, as a result of the extension of the lease (the sum of the interests of the Competent Landlord, lessee and any intermediate leaseholders after the extension of the lease, less the sum of their interests before extension); and compensation for any loss in the value of other property owned by the Competent Landlord or any intermediate leaseholders as a result of the extension, including the loss of any development value.
Answer: In addition to paying the premium, the lessee is required to pay the reasonable legal and valuation costs of the Competent Landlord and any intermediate leaseholders.
Questions - Enfranchisement of Blocks of Flats.
Below are some Frequently Asked Questions relating to the Enfranchisement of Blocks of Flats, under the Leasehold Reform, Housing and Urban Development Act 1993, or on a voluntary basis; and the answers:
Answer: Subject to satisfying the qualifying criteria, in return for paying a share of the enfranchisement price, a lessee is likely to be able to participate in purchasing the freehold of a block under the Leasehold Reform, Housing and Urban Development Act 1993.
Answer: In order for a building to be enfranchised on a statutory basis, it is necessary for it to be an independent building, or be part of a building which is capable of independent development; contain two or more flats held by qualifying tenants; not have a resident freeholder (unless the building is a purpose built block of flats or comprises more than four flats); have at least 75% of the internal floor area used for residential purposes and have at least two thirds of the flats held by qualifying tenants. To be a qualifying tenant the original lease term must have been for in excess of 21 years, not be a business tenancy, and the lessee must not own more than two flats in the building. In order to qualify for enfranchisement, the participating tenants need to be not less than the lessees of half of all of the flats in the building, but all of them, if the building only contains two flats.
Answer: To be a qualifying tenant the original lease term must have been for in excess of 21 years, not be a business tenancy, and the lessee must not own more than two flats in the building.
Answer: The personal representative of a deceased participating tenant can elect to withdraw from being a participant, but will otherwise be regarded as a participant.
Answer: If the matter proceeds to completion, the participants, through their nominee, will become the freeholder of the building subject to the various flat leases, and be responsible for the management of the building and service charge. So effectively, the participating tenants will replace the existing freeholder, and they will be able to grant themselves leases of whatever term they desire at peppercorn rents. The purchaser of the non-participants, which might be the nominee of the participants will be entitled to receive from the non-participants, ground rent, premium receipts from future lease extensions (and possibly other income from them or otherwise).
There may be taxation implications arising from the participants granting themselves extended leases and / or from receiving future income / receipts.
Answer: We are able to inspect and measure the flats, calculate the floor areas, read and interpret documents, undertake comparable research, report on the likely enfranchisement price, and figures for the Notice of Claim if acting for the participants, or for the Counter-Notice if acting for the Competent Landlord.
Answer: We will be able to act on your behalf to negotiate the price. If negotiations do not result in a satisfactory outcome, we provide a Cost Benefit Analyses to advise whether it makes sense to proceed with a hearing in the First Tier Tribunal (Property Chamber), or if the case is subsequently appealed, in the Upper Tribunal (Lands Chamber).
If a decision is taken to proceed with a hearing in the First Tier Tribunal (Property Chamber), or in the Upper Tribunal (Lands Chamber), we prepare and give Expert Evidence at the hearing, after which the tribunal will issue their determination.
Answer: After the tenant's valuer has inspected the flats, reported, and the Notice of Claim has been served, it normally takes between six and fourteen months for the freehold purchase to complete. Negotiating the price and terms of the conveyance is part of that process.
The valuation date is the date the Notice of Claim is received by the Competent Landlord, and the price is calculated as at that date. If the matter proceeds with a hearing in the First Tier Tribunal (Property Chamber) the process will take longer.
Answer: The enfranchisement price comprises the sum of the loss in the value of the interests in the block of the freeholder and any intermediate leaseholders as a result of the enfranchisement (loss of ground rent, the reversions, other income, and development potential etc); 50% of the marriage value arising as a result of the enfranchisement from the tenants that currently have terms of less than 80 years unexpired, being able to grant themselves leases of whatever term they desire at peppercorn rents; Hope Value for the prospect of receiving future premiums from the extension of the leases of the flats held by the non-participants; and compensation for any loss in the value of other property owned by the freeholder or any intermediate leaseholders as a result of the enfranchisement, including the loss of any development value.
Answer: In addition to paying the enfranchisement price, the participants will be required to pay the reasonable legal and valuation costs of the freeholder and any intermediate leaseholders.
Questions - Enfranchisement of Houses.
Below are some Frequently Asked Questions relating to the Enfranchisement of Houses under the Leasehold Reform Act 1967, or on a voluntary basis; and the answers:
Answer: Subject to satisfying the qualifying criteria, in return for paying the enfranchisement price, lessees are likely to be able purchase the freehold of their house under the Leasehold Reform Act 1967.
Answer: In order for the building to qualify it must be a “house”. This can include a shop with flat above, or a building converted into flats, and possibly offices. It will not be a “house” if a material part lies above or below a part of the structure not comprised in the house. The lease must comprise the whole of the house and the original lease term must have been for in excess of 21 years, or for in excess of 35 years for a business tenancy. The tenant must have owned the lease of the house for a minimum of two years. The tenant also has to have occupied the house as their only or main residence for a period of two years out of the preceding ten if the house has a mixed use with a business tenancy (such as a shop with flat above) or if it contains a flat which is subject to a qualifying lease under the provisions of the Leasehold Reform, Housing and Urban Development Act 1993.
Answer: The personal representative of a deceased qualifying tenant can make a Claim, provided that right is exercised within a period of two years of the date of grant of probate.
Answer: We are able to inspect and measure the house, calculate the floor areas, read and interpret documents, undertake comparable research, and report on the likely price (whoever we are acting for) including an assessment of the basis of valuation (this must be stated by a tenant in their Notice of Claim).
Answer: We will be able to act on your behalf to negotiate the price. If negotiations do not result in a satisfactory outcome, we provide a Cost Benefit Analyses to advise whether it makes sense to proceed with a hearing in the First Tier Tribunal (Property Chamber), or if the case is subsequently appealed, in the Upper Tribunal (Lands Chamber).
If a decision is taken to proceed with a hearing in the First Tier Tribunal (Property Chamber), or in the Upper Tribunal (Lands Chamber), we prepare and give Expert Evidence at the hearing, after which the tribunal will issue their determination.
Answer: After the tenant's valuer has inspected the house, reported, and the Notice of Claim has been served, it normally takes between six and fourteen months for the freehold purchase to complete. Negotiating the price and terms of the conveyance is part of that process. The valuation date is the date the Notice of Claim is received by the Competent Landlord, and the price is calculated as at that date. If the matter proceeds with a hearing in First Tier Tribunal (Property Chamber) the process will take longer.
Answer: There are three different valuation methods under the 1967 Act:
If the house qualified before 1993 and had a rateable value of less than £1,000 on 31 March 1990 then the valuation is under section 9(1), which excludes any marriage value and restricts the valuation to a proportion of site value.
If the house qualified before 1993 but did not have a rateable value of less than £1,000 on 31 March 1990 then the valuation is under section 9(1A), and includes the value of the capitalised rent, landlord’s reversion, and 50% of the marriage value in situations where the unexpired term was for less than 80 years at the date of the Claim.
If the house qualified after 1993, then the valuation is under section 9(1C), and includes the value of the capitalised rent, landlord’s reversion, and 50% of the marriage value in situations where the unexpired term was for less than 80 years at the date of the Claim, plus any loss in the value of other property owned by the freeholder as a result of the consequence of the severance of the house from other property owned by the freeholder.
Answer: In addition to paying the price, the lessee is required to pay the reasonable legal and valuation costs of the freeholder and any intermediate leaseholders.
Are you ready to find out how we can help you?
Please call or e-mail us to find out how we can help with your property issue.
Thorough
We carefully consider and interpret all documents and matters of relevance to each situation.
Creative
We devise strategies to ensure circumstances are utilised for our clients' maximum benefit.
Experienced
We utilise experience from acting on all sides of disputes, to negotiate settlements in our clients' interests.
