Property
Buying and selling houses, transfers of equity, remortgages, commercial property, granting new leases, lease extensions.
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If you own a leasehold property, it is inevitable that you will at some stage need to extend your lease, especially if you are looking to sell your property. Most lenders will not lend on a property with a remaining lease term of 85 years or less and in fact there is a cut-off of 80 years at which point it would be near impossible to obtain a loan from a bank or building society on the property. Additionally, the lower the remaining term, the more expensive the extension will be.
Carpenter & Co have over 30 years’ experience in this area and we will make the lease extension process as stress-free as possible whilst at the same time ensuring that you receive the best service at the most competitive local rates.
The Premium
The starting point is to obtain a valuation of the premium from a valuer who is experienced in lease extensions. This is the price you will pay the landlord for your lease extension and is calculated on the basis of the value of the property, the ground rent payable on the property and the number of years remaining on the Lease, along with a number of other factors.
The premium to be paid is determined in accordance with a formula spelt out under the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) which is open to interpretation. Therefore, inevitably, the figure proposed by the landlord’s surveyors tends to be more than that recommended by the tenant’s surveyors.
The Marriage Value
If the term of the lease falls below 80 years then the premium includes an extra component, due to the “marriage value”. When you extend a lease, the value of the sum of the leaseholder’s and landlord’s interests in the property rises, and “marriage value” refers to this increase. If the term is less than 80 years then marriage value must be calculated and 50% of it must be paid to the landlord, whereas if the term is 80 years or more then the “marriage value” is automatically set to zero.
This can make a substantial difference to the amount you have to pay. Therefore, you should always look to extend a lease before it hits the 80 year mark.
What the Process Looks Like
If we can agree matters outside of the Act we can avoid serving a Notice of Claim but in my experience landlords in this area are well aware of the provisions of the relevant Act and they will string matters out for as long as possible in the hope that they will recover a higher premium. My usual practice is, therefore, not to negotiate outside of the Act but rather to serve a Notice of Claim firstly under the Act, and then negotiate.
The landlord has two months from service of the Notice of Claim within which to file a Counter Notice. There is then a period of negotiation for up to two months during which time the parties have constructive negotiations with a view to settlement.
Inevitably, the only issue which we will not be able to agree will be the premium that you have to pay for the lease extension. In the absence of agreement, the First-Tier Tribunal will determine the premium to be paid and after a two month period of negotiation, we would advise that we make an application to the First-Tier Tribunal (Property Chamber) (“FTT”). Your surveyor and your landlord’s surveyor will continue to negotiate in respect thereof in the meantime. If we can agree the premium and the rest of the terms of the lease extension, this will be for a period of 90 years in addition to the period remaining under your lease.
You are responsible for payment of the landlord’s legal fees and surveyors costs as well as your own.
Our Fees
Our initial fees for preparation and service of the Notice of Claim will be £600 plus 20% VAT. If matters cannot be agreed and if the case had to proceed all the way to a Hearing before the FTT, we would estimate our fees would be approximately £3,000.00 plus 20% VAT for everything plus the Landlord’s legal and surveying fees, although going as far as an FTT hearing is quite unusual unless the parties are very far apart on their valuations. In addition, if we have to apply to the FTT there will be Tribunal fees of £300. If, however, matters are agreed at an early stage then obviously these costs will be much less.
Once matters are agreed or the premium payable determined by either the Court or the FTT we will deal with the completion of the new lease. Our fees for this will be in the region of £600.00 plus 20% VAT and Land Registry fees.
Likely Timescales
Leasehold enfranchisement claims including lease extension claims are guided by timescales set out in the legislation itself. This does not mean that we are able to confirm precisely how long your claim will take, as this depends on the position taken by your landlord and Court or the First-Tier Tribunal (“FTT”) availability as necessary. It is usual for a claim of this nature to take between 12-18 months to conclude, but can be as long as 18 months or more in some cases.
Once the Lease has been completed it can take the Land Registry 12-18 months to register the Lease Extension. Therefore, if you are looking to sell your property or re-mortgage, it is important you let us know at the start of the process so that we can make the necessary arrangements.
Please contact Paul Verlander by email at PaulV@carpenterssolicitors.co.uk or by telephone on 020 8669 5145 for further information.
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