What is a Leasehold?
Leasehold flats can be in purpose-built blocks, in converted houses or above commercial or retail premises. They will also include maisonettes, which term is, generally, used for flats with their own separate entrances.
Leasehold ownership of a flat is simply a long tenancy, the right to occupation and use of the flat for a long period. This will usually be for 99 or 125 years and the flat can be bought and sold during that term. The term is fixed at the beginning and so decreases in length year by year. If it were not for inflation, the value of the flat would diminish over time until the eventual expiry of the lease, when the flat returns to the landlord (although an assured tenancy would then become a possibility).
The leasehold ownership of a flat usually relates to everything within the four walls of the flat, including floorboards and plaster to walls and ceiling, but does not usually include the external or structural walls. A garden can be included unless it is a communal garden for the building. What the leaseholder owns is often defined in the lease as the Demised Premises. The structure and common parts of the building and the land it stands on are usually owned by the freeholder, also known as the landlord. The freeholder is, normally, responsible for the maintenance and repair of the building. If so, the costs for doing so are recoverable through the service charges and billed to the leaseholders. The landlord can be a person or a company, including a local authority or a housing association.
The Process to Extend Your Lease
As the lease to a property becomes shorter it depreciates in value. Prospective buyers may overlook purchasing your property because the lease it too short. Lenders also require a minimum term on a lease for a prospective buyer to secure a mortgage.
There are two ways you can overcome the short lease problem, and these are set out below.
The Formal Approach
The Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) provides leaseholders with the right to extend their Lease; subject to certain qualifying criteria being met. A formal valuation will be required which will ascertain the cost to extend that lease. You will need a conveyancing law firm to organise the lease extension and liaise with the Freeholders solicitor. The legal fees are based on the complexity of the lease extension and usually start from £850 plus VAT.
The Informal Approach
If you do not want to go down the formal route you can approach your Freeholder informally to see if they are willing to grant a lease extension. However, please be aware that this may not result in the best deal for you. You also need to be aware of unrealistic ground rents which the Freeholder may require you to enter into as part of the ‘deal’. The ground rent increases may seem suitable now, but they can be detrimental in the long run making your property unmortgageable or unsaleable in the future.
We have a specialist team with a wealth of experience in this area. We can provide you with more details about the process and a fee estimate without obligation.
Please contact one of our team who will be happy to assist you and make the process as seamless and stress-free as possible.