Top ten tips for leaseholders
- Know your lease – years left is key to value
The value of your lease will depend on how many years remain unexpired. As the remaining lease length approaches 80 years, this may significantly affect the value and saleability of your property.
- Know your Landlord – some are easier to deal with than others
The statutory entitlement is for an additional 90 years and will reduce the ground rent to zero. Often Freeholders will be prepared to agree to a shorter extension and to keep ground rents if this can be done quickly for a smaller premium.
- Know your Neighbours – consider the benefits in joining together
If a group of leaseholders join together to extend their leases at the same time this can reduce the costs of professionals and add to the bargaining power. You could also consider collectively purchasing the freehold or exercising the Right to Manage.
- Know your building – check it qualifies
Look at whether the building is self-contained, structurally detached and/or if there are parts which are not occupied in relation to residential use. These factors may all determine whether or not the building qualifies for collective enfranchisement and/or Right to Manage.
- Don’t let it slip away – leases are more expensive to extend below 80 years
Below 80 years there is an additional factor of “marriage value” which is added to the valuation of the price payable and the cost of the lease extension – this will increase exponentially as the lease length gets shorter.
- Think ahead – mortgage companies are unlikely to lend on leases below 65 – 70 years
Most mortgage lenders will not lend where a lease is less than 65 - 70 years and so there is limited scope to sell unless it is to a cash buyer and the price will be reduced to reflect this. Any purchaser will need to own the property for 2 years before being able to extend the lease on a strategy basis unless you serve a notice in advance and assign this to them.
- Consider all options – bad management can be solved by collectively purchasing the freehold or exercising the right to manage
If your freeholder is also responsible for managing your block of flats, this may give rise to problems which can be resolved by more than half of the qualifying leaseholders taking over control. This can be done by collectively purchasing the freehold (in which case lease extensions can then be done as well, without premium) or exercising your right to manage.
- Know what it’s worth – potential development value of parts of the building increases the price
Often there is scope to develop parts of the building such as roof space or basements which form part of the freehold and in these circumstances development or “hope” value can be added to the premium payable.
- Diarise deadlines – statutory deadlines are strict
If you fail to apply to the Tribunal or the Court within the strict statutory deadline, your claim will be deemed withdrawn and you will have to pay the freeholders legal and valuation costs and wait 12 months before you can start again which will inevitably increase the price payable.
- Ask the Experts – always seek expert Legal and Valuation advice
This is a complex area of law and valuation and it is important that you take advice from professionals specialising in the subject.