For a number of years most residential flat owners have had the right to extend their leases. There have been a number of legislative changes which have on the whole extended and simplified that right. As one would expect there are qualifying criteria to be met and special circumstances and exceptions. Nevertheless the right is very valuable and which should be considered sooner rather than later.
The main ones are as follows and it should be noted that there are a number of exceptions and special situations:
The flat must be held under a long lease i.e. one which was granted for a term of more than 21 years
The flat must have been owned by you for more than 2 years
It is no longer necessary for you to have lived in the flat. There is no residency qualification, only one of ownership.
So Why should I bother?
As the length of the unexpired term of the Lease decreases so does its value and therefore the value of your property.. If the Lease has, more than 100 years to run then this decrease may be negligible however there will become a stage when it will become much more relevant.
If a lease has less than 80 years unexpired when you seek to extend it then as part of the price you will have to pay what is known as a marriage value to the landlord. This could be significant. It is the main reason why you should consider extending sooner rather than later.
You may encounter difficulties if you want to sell your flat if the unexpired term is less than is regarded as mortgagable by most lenders. The will also therefore have a considerable effect on the type of purchasers you can attract and the level of value you would be able to achieve. Different lenders have different criteria but they are generally looking for an unexpired term of at least 65 years. There are special considerations applying to flats in certain prime Central London areas.
You will be able to extend your lease for a term of 90 years beyond the term remaining. So if your lease is 60 years you would extend it to 150 years. The ground rent is also reduced to peppercorn. (effectively you pay nothing for the whole new term).
The amount you will have to pay depends how long remains on your current lease. The valuation formulae are based on ground rents and yields and the length of the unexpired term.
As mentioned above it is very important that if your lease has less than 80 years left at the date you serve your Notice on the landlord you must also pay a marriage value which can considerably increase the price.
Because of the calculations involved It would be most sensible to have a formal valuation from a valuer specialising in this field. Castles Surveyors have that expertise. For the negotiations you need to have an idea of how much you are likely to pay and it is necessary to specify a price in the Initial Notice. If the price is unrealistic this could lead to your Notice being declared invalid.
In addition to the price of the extension, you will also have your professional costs which will be those of your solicitors and surveyors and, in some more complex cases, possibly those of a barrister. Estimates should be obtained. Importantly, you should note that if you do serve a notice on the your landlord then you will be liable for the reasonable costs of the landlord in connection with any investigation the landlord is required to carry out, obtaining a valuation of your flat, and negotiating and granting a new lease to you.
There will also be the usual payments to third parties as with any conveyancing transaction including Stamp Duty Land Tax (depending on the price you pay), Land Registry fees and other incidentals such as search fees. As this is a specialist area any professional fees are unlikely to be cheap. You should therefore obtain a legal adviser who is used to dealing with these matters. Castles Surveyors can recommend the right person for you.
The ultimate cost will depend on a number of factors including the complexity of the transaction and how long it takes and importantly whether or not it is necessary for the matter to be referred to the Leasehold Valuation Tribunal.
In most instances claims to enfranchise are resolved by negotiation between the valuers for each party. In those cases where there is a dispute as to entitlement or the price cannot be agreed then the matter can be referred to the Leasehold Valuation Tribunal. This can be a lengthy and expensive process. Although, as mentioned above, you are required to pay the reasonable costs of the landlord you are not liable for the costs of the landlord in respect of any proceedings before the LVT, except where the LVT determines that an application should be dismissed or one party has acted unreasonably in the proceedings.