Flat Living WEBSITEGUIDE
Leaseholdersmusttake professional advice when considering a lease extension
extendingyourlease Leaseholdershavetherighttoextendtheir leasebutwhat arethe implicationsfor flatowners?
Inthepast If alease hadfallen below80years thefreeholder hadflatowners over abarrel. Shortlease flats couldbecome virtuallyun-saleable without alease extensionand the freeholderwas free to namehis priceonextensionsorrefuseto extend at allwhilethe cost rose inexorably. Thiswas recognised to be inequitableand the Leasehold ReformActwas passed in 1993,givingleaseholders the righttoextend their lease for afairprice.Under thesame Act groups of leaseholders in blocks of flats were given the right to buy out their freeholder completely bywhat is known as collective enfranchisement. Collective enfranchisement requires participationbyatleast 50%of flat owners and there are othereligibility requirements so leaseholdersmust take professional advice if considering this course of action.
What’s the
benefit? Thebenefitofextendingyour lease under the 1993 act is that theentitlement is foran
additional90years at no ground
rent.Thismeans that once extended, flat owners can have thepeace of mind that their investment in theirownproperty is secure foralifetimeand the asset is no longer adiminishing one. Aflat with alease extended underthe statutoryprovisions should sell for full market value even if it is held by the leaseholder for a generation. Similarly, collaborating with fellow leaseholders to buythe freeholder out resolves the lease length issue because with the freehold purchase comes the righttoextendyourindividual leases by 999 yearsatany time. Thecollectiveenfranchisement route also has other benefits, particularly if flat owners are in disputewiththeir freeholders overmaintenance(or lack of it). By purchasingthe freehold, blocks of flats becomeeffectively co-operativesmanaging theirownaffairs in termsof maintenanceand insuranceand usuallymakesignificantsavings in theprocess. In this respectit is similar to the ‘right tomanage’ whichhas morerecentlybeen granted to leaseholders but
Shortleaseflats could becomevirtually unsaleable
34
withoutthe limitations. Nor is ‘right tomanage’ a remedy forshort leases.However if leaseholders arehaving management issuesand do not qualify forenfranchisement, ‘right tomanage’isanother alternative to explore. TheLeaseholdReformAct
1993 lays downa formula for establishingthe priceofextending your lease or buyingthe freehold butwhatconstitutes afair
priceremains hotlycontested. Within the set formula are a number of variables andwhile onesurveyormightputforward avalue favourable to flat-owners anothermight take astancemore favourable to the freeholder. For this reason both sidesshouldtake independent advice.●
Toreadthis article in full,go
towww.flatliving.co.uk/ advice/119-why-extend- your-lease
WhaTElSEISThErEonlInE formE? Othertopicscovered by
this area of thewebsite include: nWhy do I have to extendmylease?
http://www.flat-living.co.uk/advice/123-why-do-i-have-to- extend-my-lease
nCan we extend our lease?
http://www.flat-living.co.uk/advice/496-can-we-extend-our- lease
nhowlong can I extendmylease for?
http://www.flat-living.co.uk/advice/124-how-long-can-i-extend- my-lease-for
nhowismylease extension calculated?
http://www.flat-living.co.uk/advice/130-how-is-my-lease- extension-calculated
nWhen is the best time to extendmylease?
http://www.flat-living.co.uk/advice/125-when-is-the-best-time- to-extend-my-lease
nWhat is marriage value?
http://www.flat-living.co.uk/advice/500-what-is-marriage-value
nWhat is a section 42 notice?
http://www.flat-living.co.uk/advice/501-what-is-a-section-42- notice
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