You are the leaseholder or purchaser of a flat and want to know what premium you will have to pay to extend the lease?
You have established you satisfy the qualifying criteria, or if you are a purchaser, that your vendor does, and they are willing to serve Notice of Claim, and assign the benefit to you, and that it is possible to obtain a statutory 90 year extension of the lease, under the Leasehold Reform, Housing and Urban Development Act 1993. See Can the lease be extended? You, or if you are a purchaser, the vendor, are contemplating serving a section 42 Notice of Claim, and need advice on the premium, and figures to insert in the Notice.
The following describes how the premium is calculated:
What premium will I have to pay? Method of calculation.
The premium you will have to pay comprises the the sum of the following:
- Diminution in the value of the interests in the flat of the competent landlord, and any intermediate landlords (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 (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, including the loss of any development value.
In addition to paying the premium, you will have to pay the reasonable legal and valuation costs of the competent landlord and any intermediate leaseholders.
What premium will I have to pay? Process to calculate.
In order to calculate the premium, we as Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement can:
- inspect the flat;
- calculate the floor area;
- research the market; and
- value the flat on the lease term existing, extended and with 999 years unexpired and a share of the freehold, all excluding the benefit of the 1993 Act, and the amount improvements have added to value.
In preparing our calculations, report on the premium, and figures for the Notice, we take account of the terms of the qualifying lease, deeds of variation, licences for alterations and any other documents of relevance. If there is an intermediate lease, we advise on the implications, including whether the interest in the flat is a Minor Intermediate Leasehold Interest (‘MILI’).
What premium will I have to pay? Negotiations.
After reporting, we attempt to negotiate the premium with the competent landlord’s valuer, to save you the expense and risks of a First Tier Tribunal (Property Chamber) hearing, with possible appeal to the Upper Tribunal (Lands Chamber).
If negotiations do not progress so we can recommend settlement, we provide a Cost Benefit Analyses to assess the sense of proceeding 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 to tribunal, we prepare and give expert evidence at the hearing, after which the tribunal will issue their determination.
What premium will I have to pay? Examples of our recent work.
We have recently:
- Lease Extension: Negotiated a lease extension of a flat on a voluntary basis, so that the purchaser entered into agreement, that upon exchange of contracts, the freeholder became contractually bound to grant a 90 year extension, upon simultaneous receipt of the premium, transfer, and completion of the lease.
- Valuation for Acquisition / Lease Extension: Reported on the premium likely to be payable for the statutory 90 year extension of the leases of two flats, held on terms with 11 and 19 years unexpired, the reasonableness of the provisionally agreed purchase price, and strategy for negotiation.
- Lease Extension – two flats: Gave evidence to the First Tier Tribunal, resulting in a saving of £1,080,000 in the premium, as compared to the one sought by the freeholder’s valuers in order to settle, rather than have the case determined by the First Tier Tribunal (Property Chamber).
- Lease extension report for vendor: Assisted the client vendor’s marketing of a flat held on a short lease, by advising on the premium likely to be payable for the extension of the lease, assuming the vendor serves Notice of Claim, with the benefit being assigned to the purchaser, in order to avoid them having to wait two years from the date their purchase is registered with the Land Registry before being able to serve Notice of Claim.
Our services: We are able to advise you on the premium you are likely to have to pay for the extension of a lease or leases of flat/s where you are the lessee or purchaser. If you are contemplating serving a section 42 Notice of Claim under the 1993 Act, we are also able to advise on the figures to insert in the Notice. We are Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement. We are also able to provide further information to answer What premium will I have to pay?
