Strettons’ enfranchisement team primarily deals with lease extensions, positioning us well to handle any case with any complexities. Lease extensions are usually preferable for lessees as they extend the ownership and value of our clients’ largest assets in the most straightforward way.
The best factor, albeit that which can also feel the scariest for those unused to the process, is that you proceed alone. There is no dependency of other flat owners as to the time frame, instructions of professional advisers, or the decision making, as there is when you are buying the freehold of the building with co-flat owners.
Strettons has been giving advice on lease extensions of flats since 1993. Since 2003, the department has grown significantly and now has seven qualified valuers, all with significant knowledge of this process and the valuation of the premium. Our experience covers the whole of London, the Home Counties and has spread as far as Warwick.
If you are considering a lease extension please feel free to call any of us to discuss your options further.
For more general questions, here are a few of our most frequently asked questions.
Q: Why should I extend the lease of my property?
A: In short, to add value to your property. A lease is a diminishing asset and problems arise when an owner wants to sell or remortgage. Purchasers prefer longer leases, while mortgage providers are reluctant to lend on less than 70 years' unexpired. The longer leaseholders wait to extend their lease, the more costly it may be when it comes time to renew.
Q: What is a leasehold reform valuation?
A: Simply put, leasehold reform valuations are a multiplier of the ground rent payable for the term (adopting yield referred to as capitalisation rate), then arriving at the current value of the property assuming the freeholder will not own it until the lease expires, which is why we use a deferment rate. In cases with less than 80 years unexpired on its term, we apply a marriage value.
Q: Am I qualified for a lease extension for my flat?
A: In general, a tenant will be qualified for a lease extension if:
- The lease is longer than 21 years when initially issued
- You have been registered as the owner of a flat for two years
Exceptions for qualifying for a lease extension (please take specialist advice in each case:
- Your freeholder is the Crown
- The building is part of the National Trust
- Some of the building is in a cathedral precinct
- Shared ownership - unless they have fully staircased
Q: What is the process of extending the lease of a flat?
A: Most lease extensions follow the same steps:
- Obtain valuation advice
- To save costs, some lessees approach the freeholder to see if they can reach an agreement before progressing
- Failing this, after a short period of time, serve a "Section 42 Notice", also known as a statutory notice
- Typically, the freeholder will appoint a valuer (It is the leaseholder's responsibility to pay for the freeholder's valuation advice)
- After a notice has been served, a counter notice will be served by the freeholder (also a "Section 45 Notice")
- The parties’ valuers will negotiate. Alternatively, the leaseholder can negotiate directly with the freeholder or their valuer)
- Both parties reach an agreement. If no agreement is reached, it will progress to FTT.
- The solicitors tie up the legal matters
Though the steps can seem straightforward, complications often arise. Please be cautious and seek advice from professionals.
Q: What does the Leasehold Reform, Housing and Urban Development Act 1993 mean to me?
A: It allows lessees to extend their lease by 90 years at a peppercorn [nil] ground rent in exchange for paying a premium and some costs, or in some cases, to club together with their neighbours and buy the freehold of the block. The longer the lease, the cheaper it is to do.
Q: What happens when a tenancy runs out?
A: An expired lease doesn't mean you have to leave the property. If neither you nor your landlord has taken steps to end the tenancy, it will continue on the same terms. Until you receive notice from your landlord, you aren't required to do anything.
One of the following needs to happen for a tenancy to end:
- You, the tenant, surrenders the tenancy at your discretion
- The landlord will serve a prescribed notice to the tenant to regain possession of the property
- The landlord obtains a court order to gain possession of the property
- The landlord may serve a prescribed notice proposing an assured periodic tenancy, where you pay a monthly rent
If none of the above occurred yet, you are still the legal tenant, and it is still a possibility to extend the lease or purchase the freehold.
Q: Why do I need a valuer?
A: The method of valuing a lease extension is set down by Statute. It is complicated and involves a lot of hypothetical assumptions. There are online calculators that can provide a guide, but as there are so many variables, it is inadvisable to rely on less specific figures without seeking specialist advice. For details on how valuations are carried out, visit our Guide to Lease Extension Valuations here.
Guide to Lease Extension Valuation
The premium needed to be paid for a new lease should be the total of: