Leasehold Ownership: Key points to be considered

Many questions may arise while purchasing a leasehold property. The questions that occur most frequently relate to the length of the lease and the service charges applied to buyers wanting to purchase leasehold property.

Our experienced chartered surveyor gives his advice on the six top leasehold issues.

What is Leasehold Ownership?

Leasehold ownership is the right to hold a residential property for a specified period. Leasehold ownership is based on lease terms but also has associated property rights. It has similar rights as a freeholder has but only for the specified length of the lease.

Residential Lease – Why is it Important

The residential lease is an agreement between the leaseholder and the landlord to establish the rights of both parties. The lease agreement defines the rules or obligations as to the use of the property, also how the landlord and leaseholder should deal with each other and any other leaseholders. In addition, it defines the landlord’s obligations relating to such issues as repairs, service charges, maintenance, and management of the property. Any leasehold agreement is crucial, and the leaseholder must understand the obligations, on both parties, that it contains.

The lease wording is usually in legal or technical vocabulary and will vary from property to property. Leaseholders who find it difficult to comprehend their lease should obtain advice from a surveyor and insist they deliver a report on its terms when required to negotiate with the buyer.

Any potential buyer must establish responsibility for key issues, including the landlord’s obligations for managing and maintaining the structure, exterior, and common areas of the property, what the leaseholder’s duties will be with regards to rent and service costs, and whether there are any unusual or onerous covenants relating to the leaseholder’s use of the property.

Things to know before Buying a Leasehold Flat

Leasehold flats may be in purpose-built blocks, converted houses, or attached to retail or commercial premises. Usually, the structural part of the building and the land will stay in the landlord’s ownership. The lease agreement will cover all the spaces and facilities within the four walls of the flat, including walls, floors, and ceiling, but will not normally include any external areas. The landlord is generally responsible for the maintenance and repair of the building. Additionally, it is the landlord’s responsibility to maintain common areas and the flat’s structure and services.

The property owner can be an individual, a local authority, or a company. It is also possible that the landlord is a resident management company. In some cases, leaseholders of a block of flats can apply to extend the term of their lease or can buy the freehold from the landlord.

Remaining Lease Length

The term remaining on the leasehold is crucial. Firstly, if the lease term drops below 80 years, the cost to extend the lease increases as an additional marriage value is added. “Marriage value” is the increase in the value of the property with a long lease as opposed to a short lease. Hence the value of the property will increase on the completion of the lease extension, meaning the cost of the lease extension increases once the lease length drops below the 80-year threshold.

For more queries related to the length of the remaining lease and how much any lease extension may cost, have a lease extension valuation undertaken by an expert lease extension valuer.

Another issue to consider is that the property’s value drops each year once or reaches less than 80 years. Therefore, you must apply for a lease extension or buy the freehold in order to maximize the value of your property.

What does the service charge cover?

Generally, a service charge is a charge for the leaseholder to cover the costs of any services that landlords provide, such as cleaning the common parts, repairing the roof, gardening, etc. For some leases, the service charge would be a fixed sum that will be payable on a regular basis. Leaseholders can ask for a breakdown of the service charges and also have the right to apply for the First-tier tribunal for any unreasonable charges in England. During the process of buying a leasehold flat, the buyer should check the details for any existing and future service charges and should also check for any forthcoming work which might affect the service charge after the purchase.

Buying a Leasehold Flat, Is Worth It?

Historically, in the UK, flats have been sold on a leasehold basis. Some leasehold flats are now sold with a share of the freehold. Buying a leasehold flat should only be done once you are familiar with the legal rights and duties related to buying a leasehold property. You should consult a chartered surveyor and get appropriate professional advice regarding any property before you consider buying.

How To Negotiate a New Rent Rise | Trick Revealed

So, you’ve finally found a place you’re comfortable with. The neighborhood is good, no leaking pipes and no creepy noise are coming from the walls at night, and just when you thought it couldn’t get any better than this, it’s already that time of the year when the landlord wants to raise the rent, potentially threatening your idea of settling down for a bit. Now that will make you think about how to negotiate the next rent rise so you can still retain your property while spending less on rent each month.

But don’t worry. Not everything has to be sad and gloomy as long as you can still try negotiating your terms with the landlord. It’s possible to reach a mutual agreement and negotiate a win-win situation for both parties, so nobody is left unsatisfied. In reality, it works like any other negotiation – you just have to find a way that makes both you and your landlord happy.

Once you begin to consider what both parties have to win or lose, it becomes a much simpler process. Of course, you want to pay less but to avoid moving out and looking for another property. At the same time, the landlord wants more money but to avoid looking for a new tenant. With that in mind, you can present an offer that suits both of you and settle on a reasonable rent amount.

If you don’t know how much to offer for a property like yours, there are two ways you can find that out, which we will discuss further. Try these methods that can help you with your negotiation. 

When do you negotiate?

There are two ways you can approach this.

  • You could speak to a local estate agent and see what similar properties in the area are letting for and also find out what their fees will be for finding a new tenant for the landlord. Divide the agent’s fees by 12 and then ask the landlord if they would reduce the current market rent by this divided amount as he will not have to pay the agent’s fees if he retains you as a tenant.
  • You could look on websites like Rightmove and Zoopla and see what similar properties are letting for and offer this amount to the landlord.

At this point, they would either agree to your terms or present you with their own offer, which you can compare with your valuation of the property.

RICS Valuation

Open up a dialogue as soon as you can

It is a good idea to establish direct contact with the landlord and work out a deal that works for both of you. Start discussing your terms early on because the earlier you begin a conversation, the more time you have to convince the landlord in your favor. Get in touch with them directly and try something like, “I would love to continue staying in the apartment, but the increase in the rent is a bit outside of my budget at the moment. Can we discuss this and find something that makes us both happy?” This can open up your opportunity to discuss your terms with the landlord.

Establishing contact with the landlord before you start to look for another property will open up a discussion and will give the landlord an idea of the kind of rent that you have in mind. Depending on their response, you can judge whether they are willing to bend or not. This can help you further down the line when finalizing the deal.

So, consider your budget, what exactly you can afford, and how far you’re willing to go to turn the deal in your favor.

The surveyor will undertake a physical inspection of the house. Before the physical inspection’s they investigate the location and analyze the local area to see if anything night influences the value. After this, they may check any documents regarding the lease extensions or any shared ownership details if necessary. They may also make inquiries with local selling agents before they arrive at their valuation.

What is an RICS surveyor?

RICS (Royal Institute of Chartered Surveyors) is a global professional organization for property professionals. It sets and monitors standards that members should adopt in their professional work to ensure consistency and a global brand that is recognized around the world.   

The RICS is connected to other national surveying institutions, collaborates with other professional bodies, and, in 2013, was a founder member of a coalition to develop international property measurement standards. It also delivers cost information and professional advice on valuation and other stuff.

What is a home buyers survey?

Home Buyer Survey is a visual inspection of a residential property that is done by a surveyor that inspects the observable spaces in your property or home. The Surveyor generates a report on the property condition and highlights the issues and defects.

How do surveyors value a property?

Instructing a Surveyor to value your property is an integral step in buying a property. When a surveyor starts evaluating the property, they look at comparable properties and the condition of your property when ascertaining the value.

What is an RICS surveyor

The surveyor will undertake a physical inspection of the house. Before the physical inspection’s they investigate the location and analyze the local area to see if anything night influences the value. After this, they may check any documents regarding the lease extensions or any shared ownership details if necessary. They may also make inquiries with local selling agents before they arrive at their valuation.

How long does a house survey take?

The house survey takes time depending on the level of the survey that you have chosen and depends on the dimensions of the house. For instance, if you are choosing a basic survey, it may take an hour to get completed. The medium-level survey would take 3 hours. And a complete structural survey depends on the proportions of the property that vary and might even take a whole day.

When will I get my house survey report?

The house survey report may take time as it depends on the particular survey and on report complexness. The chartered surveyor will let you know how much time it will take to get the report, but it will probably take 5 to 10 days.

The cost of home buyers survey

A home survey can save you time and money; how much does the home buyers survey cost? The charges vary between surveyors but will partly depend on the size of the property. The larger the home, the longer the surveyor will need to spend analyzing and evaluating it. Leasehold Valuation has experienced chartered RICS surveyors who can efficiently value your property. 

Having a survey done is usually worth doing as it will make you conscious of any problems with the property. Although initially, it is a capital outlay it could help you avoid any surprising cost in the future. It can also be used to negotiate the price of the property down if it highlights any issues.

New-build snagging survey

Are you buying a newly constructed home? In this case, you do not need a home survey. You will need a snagging survey. What does a snagging survey mean? It includes inspecting various elements of the build such as standard finishes such as plaster, tiling, or windows, and more. By having a snagging report, you can share that with the builder so that any issues in the property can be resolved whilst the builder is still on site.

Leasehold Valuation specializes in leasehold valuations, lease extensions, lease enfranchisement, homebuyer surveys, asset management, and more. Our team of Chartered Surveyors is highly experienced and delivers an efficient homebuyer survey. Have a quick 10-minute free consultation with one of our RICS experts.

Is it worth buying the freehold of your leasehold house

Is it worth buying the freehold?

It is worth buying a freehold of your house if you have a lease on it. When you purchase a property on freehold grounds, you get the ownership of the house, and the land, it is on. 

When you buy a property as a leasehold property you only have the ownership of the property for a certain period which is stated in your lease. Once the lease expires, then the house will revert to the freeholder. In addition, leaseholders also need to pay other extra charges such as ground rent or maintenance charges on the property. Furthermore, there will be terms specified in the lease about what you are allowed to do with the property or not, For example, having a pet, starting a business from home. 

In England, there are currently more leasehold flats than houses. However, the North West has the highest number of leasehold residences, despite various leaseholder issues. For such reasons, the Government in 2019 stated that no new houses will be put on sale as a leasehold property.

The majority flats are sold on a leasehold basis although some do come with a share of the freehold.

The benefit of buying a freehold of a leasehold house

One of the benefits of purchasing the leasehold property is that you will only be liable for any maintenance you undertake as opposed to simply paying the landlord an annual fee and him doing very little for it.  Another benefit is that you no longer have to pay ground rent and also you can undertake whatever alterations you want to the property without seeking anybody’s consent. This can add significantly to the value of your house and you can arrange the house to suit your needs thereby making life a bit more comfortable.

The Leasehold Reform, Housing, and Urban Development Act 1993 allows leaseholders to purchase the freehold of their leasehold property after two years of leasehold ownership. Buying the freehold of a house is worth it or extending the lease can be a more suitable alternative if you do not have the funds to purchase the freehold? 

Owning a house or flat is a significant investment.

The state of leasehold ownership in the UK is improving but not yet complete. Hence, buying freehold of your property would be very beneficial. However, the process involved in purchasing your freehold is complex and confusing. Leasehold Valuations will guide you and advise you of your best options Feel free to call us at 01753 542984 for a free 10-minute consultation.

Selling a flat with a short lease

Selling a flat with a short lease

Selling a property with a short lease can become very problematic as depending upon the length of the lease many lenders will not lend on the property. This leaves you with a very small pool of purchasers. The lower the lease, the more restrictive this becomes. It is likely that you will have to sell your property for less than its true value because any potential purchaser will have to navigate through the lease extension process, with all the additional costs and time that encompasses.

Our lease extension experts can guide you through with efficiency.

What does short lease mean?

In general, a short lease is not as short as you may think. In lease extension terms any lease that drops below 80 years is classed as a short lease. It is stated that the shorter the lease of a property, the lesser the value.

Can you sell a flat with a short lease?

There is nothing to stop a property with a short lease selling on the open market but, as mentioned above, it is likely to restrict the type and amount of potential purchasers. For this reason, a lot of short-lease properties are sold at auction. When the duration of the leasehold declines below 80 years, the lease extension cost increases significantly. Hence, a lease with a short length can be difficult to sell and you will not get the best price you could if the lease was longer.

Usually, mortgage lenders will not accommodate flats with short leases..

How to check the lease of a property?

To know if your lease is shorter or not, you need to check your property lease. If you do not have a copy of your lease, then your solicitor can download a copy from the land registry website instantly for about £7. If you need any help regarding how to check the lease duration, you can contact our chartered surveyors who can assist you. Once you get to know the detailed information about your lease duration, it will be clear to figure out if your property lease has a short lease issue or not.

How to deal with Short Lease Issues

You can extend the short lease of your property: Leaseholders who have owned their property for 2 years have a statutory right to extend the lease by 90 years. Therefore, your new lease term will be equal to the remaining term on your lease plus 90 years. If you want to extend your short lease, our chartered surveyors will assist you.

If you are purchasing a property with a short lease you can ask the current vendor to serve the statutory notice to extend the lease and transfer the right to continue the lease extension process to you upon completion of the sale. This was you do not have to wait 2 years after purchasing the property to extend your lease.

Buying your freehold: Once you buy the freehold of your leasehold house, your property will convert to freehold. Then you can sell your freehold property, which will command a higher price and the buyers can get a mortgage on it. 

Sell your apartment or resident to a cash buyer: If you have a short lease on your property you can sell your property to a cash buyer as they will not need a mortgage.

By selling to a cash buyer, there will be several benefits, you will save the expense of purchasing or extending the lease, and you will not need any solicitor or surveyor to negotiate or guide you with the freeholder. 

So why not schedule an appointment with our experts and have a valuation of your property quickly. They will guide your short-lease term issue and will provide you with the best solution.

Problems with a short-term lease

Usually, short-term lease issues occur when the owner cannot manage to extend their lease

The biggest issue with the short lease is that shorter leases are hard to sell. The shorter the property lease, the lesser the value.

Are you facing problems during your lease extension process or buying or selling a freehold of a house? Call 01753542984 for a 10-minute free consultation and talk with our lease extension specialists to solve your issue.

How many objections needed for a planning permission to be refused

How to deal with Planning Application Refusal

If you’re planning to build a project but worried about planning application refusal? Have a glimpse at our alternatives.

Concerned regarding how to apply for planning permission for alteration or lease extension? It is a difficult task. One from four homeowners states that the planning permission matters are lurching stone to proceeding with alteration plans. Hence, it is disappointing to get the application refused. Though, you can proceed further with numerous options.

Make modifications during the application.

The permission for the planning application usually takes eight weeks except if they are especially extensive or compact, then it extends to 13 weeks. During that period, each of the planning applications offered to the local authority needs to endure a session of public consultation that differs in the interval between 3-8 weeks. If someone is affected by the application, he or she will consult you during that period.

Throughout this time, questions and disapprovals will be suggested to your plans. Certain questions and objections do not conclude the consequence of the planning application. Some objections may be neglected or assumed unnecessary. While this is the period where you can assess the response to your application.

Stay in contact with the planning director. If any disapproval arrives, that may affect the outcome, then you must be ready to make changes to the plan. This is the only period where you can make changes to your project if they are miniature and do not need any planning director consultation.

The plan may have been claimed with a condition about the problem that you addressed. If these results are these, then you need to give the administrator the time frame when you made the changes. Instead, the local planning administration may approve the application subject to conditions. While if it seems that your application will be refused and there is no alternative to rescue it, then you have the following two options:

You can either take it back and resubmit the updated application, or you can proceed with the refusal and then retry.

Take back and resubmit.

The most suitable alternative is taking back your application and resubmitting it. If your application is refused by planning prospects, then you must know how to fix it.

If you are sure about the refusal, then directly withdraw the application before it gets rejected. Execute the modifications needed in the plan and then resubmit it. It can be a difficult task, there should be no charges for resubmission (residential applications pay £172 while applying initially), granted you resubmit it in 12 months, the overall result of the plan is identical. However, remark, wherever you submit a legitimate application and withdraw it, then charges will be non-refundable. Get expert advice that can get you higher possibilities of the approval of your plans.

Request an appeal.

If your application is rejected and you think that the decision is unlawful, then you have the right to request an appeal. You can inquire about your appeal in three months. (This limit is – owners for residential owners with significant plans have up to 6 months)

When your application is rejected or refused, then, the council will direct you to request an appeal. The appeal can be requested in three ways: in writing, an informal meeting, or by a public hearing. Most of the councils will suggest appealing through the written plan. In the informal meeting, you need to give more information while a public hearing will exist in rare cases.

The request appeal can be answered by the council in six weeks of submission; after that, you must comment or discuss it in 3 weeks.

Those who are affected by your plans will have the right to comment on the applications, such as your next-door neighbor. The planning reviewer will visit your house, and he will answer the requested appeal in 2-6 weeks of the visit. It can take about 5 months from appeal to the decision (it would take more time in the public hearing), and it would be considered if you settled your plan with the planning rules and you refuse to follow the plan to approach any objections.

Normally, only one appeal from three gets a favorable outcome as claimed by the Planning Inspectorate’s records. If you can make modifications to get the application progress, and your plan would not be put at risk. This point should be more clear.

Furthermore, if you go ahead with the appeal after another rejection and still your application is rejected, then take the comments from the planning inspector on board. Hence, this can assist you in making a new plan application that would not hopefully get rejected.

How to avoid stamp duty for second property

If you’re looking to buy a house or residential property in England, you must know what stamp duty is and how it works.

What is Stamp Duty?

Stamp duty is a tax you have to pay when buying a residential estate or land in England or Northern Ireland for a determined value. The same thing applies if you are buying a second home and if you own a shared property. 

The stamp duty applies to both freeholders and leaseholders of the property. While if you are purchasing a house or property in Scotland, you have to pay Land and Buildings Transaction Tax (LBTT) and Wales Land Transaction Tax (LTT) rather than Stamp Duty. If you are buying additional properties, you will have to pay an additional 3% in the Stamp Duty, on top of the updated charges for each band.

How much is Stamp Duty?

Stamp duty has various price bands. For example, if you are a first-time buyer, the stamp duty cost differs from that of a second-time buyer.

Piggy bank calculator

How much is the stamp duty for a first-time buyer?

It can be perplexing to know how much stamp duty a first-time buyer has to pay as it has changed a few times over the past few years 

In England and Northern Ireland

There is no stamp duty payable by first-time buyers on the first £300,000 of a residential property. It has also been reduced to 5% for properties between £300,000 -£500,000.

When do you pay stamp duty?

You have to pay stamp duty within 14 days of completion, if you don’t pay the stamp duty tax in 14 days you might get charged a fine or interest. 

How much is Stamp Duty?

  •       Zero for properties upto £125,000
  •       2% for the portion of the property price between £125,001 – £250,000
  •       5%  for the portion of the property price between £250,001 – £925,000
  •       10% for the portion of the property price between £925,001 – £1.5Million
  •       12% for any portion above £1.5 Million

How much is stamp duty for second homes?

In England, from April 2016, an additional stamp duty came into existence for additional properties (ie if you already own a property and are purchasing another). If you’re purchasing a second home or other property, then you’ll have to pay an extra 3% in the stamp duty charges. These additional charges are applied to the properties purchased for £40,000 or more. 

How to avoid stamp duty on a second home?

You do not have to pay stamp duty tax charges on a second home while:

  • The estate’s cost is less than £40,000
  • if you are left the property in a will
  • you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
  • property is transferred because of divorce or dissolution of a civil partnership

I’m getting divorced and buying a home. Do I have to pay the second home rate?

There are specific rules and regulations for this.  

If one of the partners leaves the marital house and a ‘property adjustment order’ exists in the situation to deliver the home over to Partner B, then the additional stamp duty charge does not apply.

If you haven’t arranged a ‘property adjustment order’ – your separation lawyer will help you with this – then you may have to pay the extra stamp duty charges. Although, you can ask for a reimbursement if you sell your share in the marital house in three years of when you walked out.  

For further questions related to Lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.

Making Alterations to a Leasehold Property

Making alterations to a residential leasehold property is not always a simple task. Many leases allow the landlord to charge alteration fees from the leaseholders. A Leasehold Valuation Expert will know about what steps should be taken in such cases.  

The common questions which are asked by the leaseholders about home repair and improvement are,

  • Can you make alterations to a leasehold property?
  • What fees can a landlord charge to the leaseholder? and does the landlord grant permission to do so?
  • Can you build an extension on a leasehold property?

Are you facing the same issues as a leaseholder or dealing with any other leasehold problems? Our Leasehold Valuation team can help you out with such leasehold issues.

Leasehold Property Alterations

Are you looking to make structural changes to your leasehold property? Then what should you check before proceeding further:

  1. Check your Lease Agreement: Some landlords may grant you permission in the lease only for making minor changes and alterations and some may not grant permission at all without seeking their permission first.
  2. Discuss with the Freeholder/Managing Agent: They will analyze if the proposed arrangement of a leasehold flat will cause any impact on the layout of the flat or will affect neighboring flats.

Even if landlords permit you to make alterations, they may restrict you by imposing certain conditions that may increase the cost of the works. Some may ask you to revert the alterations to the original at the end of the lease or at the time when you leave the flat in the future.

You should obtain legal advice from an expert or experienced chartered surveyor. You must seek permission for the alterations and improvements on the leasehold property in regards to building regulations, structural alterations, electricity, pipes leakage repair or gas line work, drilling walls, constructing a new kitchen or bathroom.

You should also put a Party Wall Award in place between yourselves and your neighbors (even if in an adjacent building)

The permission for proposed alterations will depend on how large the renovation or the alteration work is. For massive remodelings, the landlord may provide a license for alterations keeping in mind the effect of the alteration on the residential property. Even after leaving the property, it is crucial to know that the lease is planned to preserve the benefit of all the individuals and not harm the flat structure.

Costs of Alterations:

With regards the alteration cost, you may also have to pay a fee for the license to alter to the landlord. The Landlord and Tenant Act 1927, Section 19 states that the alterations license or consent permission is not to be irrationally denied, the right of the landlord to claim for the charges of a moderate amount is a legal right of the landlord. This may include administration charges, legal fees, hiring of technicians/engineers, granting a license, and reinstatement clause. 

The landlord may charge you more than the reasonable cost to make a profit. In October 2017 the Department for Communities and Local Government affirmed that the leaseholders may suffer unfair costs while making alterations to their leasehold property. The Conveyancing Association has concluded that 75 percent of leaseholders are paying unreasonable “regulatory” payments to their landlord or managing agent as standard and that schemes to correct this unreasonable behavior are inadequate.

In April 2018 the Ministry of Housing, Communities, and Local Government stated that the government and authorities will look into this unreasonable behavior and will investigate the fees that are sometimes more than the service charges, which can affect both the leaseholders and freeholders and examined under what conditions they are justified. 

A leaseholder has the right to question the unreasonable charges, if required, at the First Tier Tribunal or Leasehold Valuation Tribunal. But before applying to the tribunal the leaseholder should speak to a qualified professional in order to understand the application process as well as the law surrounding it. This is a complicated and time-consuming process. Therefore, it is suggested to first have a conversation with a landlord to see if this matter can be resolved.

If you have any questions or queries regarding the law and regulation of leasehold property alterations then you can contact one of our chartered surveyors without any hesitation.

Can a premium be imposed as a condition of granting permission?

This really depends upon what works are being undertaken and also what the lease states about alterations.

The demised premises are the premises included in the lease agreement. The demise premises do not cover the structural or exterior walls. It includes interior walls, interior roofs, or ceilings. Such elements are described precisely in the lease agreement in detail.

If the alteration to the demised premises has been accepted then a reasonable premium can be charged by the landlord. If the permission is refused then the leaseholders can ask for advice and help from the court or the Leasehold Valuation Tribunal. 

Alteration to the landowner`s retained property

The part which is not included in the demised property is the retained property and is a freehold or landlord property. Any alterations to the retained property are highly unlikely to be granted permission by the landlord.

If you are looking to undertake renovations or alterations, Leasehold Valuation Experts can help you in progressing through this process seamlessly. Call 01753542984 for a 10-minute free consultation for lease queries.

Shared Ownership Lease Extension UK

Shared Ownership Leasehold and Lease Extensions

Are you aware of what is shared ownership in lease extension, how it works? No, then you’re at the right place. Many people have the same confusion about how shared ownership relates to lease extension in the UK. Initially let us recall what is leasehold, Leasehold is an ownership of a resident for a long-term period. Generally, this could extend to 99 or more years and in this period the house can be sold or bought.

Leaseholders also have a statutory right to extend the flat lease if the term is exceeded more than 21 years. The value of the house shrinks down year by year till the lease expires. After which usually the ownership reverts to the landlord. A leasehold has the right and responsibility of all the interior and exterior residing of a flat. The leaseholders have to keep an eye on the maintenance and repairs of the entire flat.

What is Shared Ownership Leases?

In the same way as the leasehold ownership, there is another ownership named shared ownership. In which the leaseholders have the right to buy a share of the flat or a house and remunerate for that part of the property. Leaseholders possess the right to purchase multiple shares till it has 100% of proprietorship. At that stage, it would be converted from shared ownership to leasehold ownership. This ownership has come into existence for those who can’t purchase or manage to buy the full property. They can have a part of it at a great premium value. Substantially, it has been carried out by the housing associations of England as a section of their house ownership scheme.

Shared ownership of a residence has the statutory right to extend the lease and the landlord may have its approach and scheme plans. Leaseholders must look over with the landlord. It may vary depending on the landlord’s choices. From the Leasehold Reform Act 1967, has been stated that the shared ownership does not have the right to buy the freehold. It would be only preferable for those who cannot afford to buy the whole of the leasehold ownership. Hence, in shared ownership also the shorter lease issue will be there. The landlord has the right to take back the leasehold at any time. If the shared ownership is transferred to the landlord, then there will be no reimbursement given to the leaseholder.

Shared Ownership Properties and the Latest Updates

In the Leaseholder’s shared ownership of a flat, the leaseholder will have to manage all the maintenance and repairs of the flat. In a special case, if the property of the flat of leasehold is in the private sector, then the cost of the maintenance, like lane, corridors, and other improvements will be payable and will not charge to the leaseholder.

Homes England accepts shared ownership leases should have fundamental points to be focused on:

1. Restrain on selling and forbidding on sublease rental.

They do not permit sublease rental in any condition. Undergoing shared ownership lease, the landlord has the right to seize the leasehold ownership if they do not have 100% ownership. This conveys that if the leaseholder of the shared ownership wants to sell the freehold then he/she has to first recommend it to the landlord or to the buyer who has been suggested by the landlord. There are also new home rent review clauses upgraded.

If the landlord does not respond to the above right from the leaseholder in under 8 weeks then the leaseholder has the right to sell the freehold to any other buyer in the demand. For all the new sponsored finance for shared ownership houses provided through the low-cost homes program 2021 whereas the resale application proposal time period has been lowered down to 4 weeks from 8 weeks.

In the 2021 plan update, the Home programs came up with a new financial policy in which the shared ownership leaseholder will be benefitted. In which they have planned that the landlord has to pay the maintenance and repair cost to the shared leaseholders for up to 10 years in the newly constructed homes. There is also a mortgage section classification planned in support of the mortgage lender and for the shared ownership leaseholders. In which loans can be provided to the leaseholder for their shared properties with mortgage protection.

Few of the shared ownership leases of flats in the countryside limits the right of the leaseholder to buy the property shares to 80%, or in case if the leaseholder is permitted to transfer to 100% of the proprietorship then he/she has the responsibility to revert the property to the landlord or any other purchaser who is willing to buy. Besides this to the countryside allowance, a shared ownership leasehold house for aged people can restrict the property share to 75%.

As all the new granted financial support for shared ownership houses given by the Affordable Homes program 2021 – 2026 and presented through Section 106 is decreased from 25% to 10% and also included an additional progressive 1% staircase process.

To calculate the cost of a shared ownership lease of property you may check out our free online lease extension calculator. It will give you an estimated cost of your shared lease property. Our Leasehold Valuations team can also help you and guide you in all kind of lease extensions and lease enfranchisements process. Contact us without any hesitation, schedule 10 minutes free consultation with one of our chartered surveyors to resolve your issues or queries related to shared ownership rights and government acts to it.

Statutory v/s Informal Lease Extension – Benefits and Risks

Investing in a residential property is always considered to be safe. If you own a leasehold property, the value of your property can depend on the remaining number of years left on the lease. You should try to extend your lease before it drops below 80 years. If you own a leasehold property, then after two years you’re eligible to extend your lease. There are 2 ways in which you can do this.  Firstly, with the formal(Statutory) route and secondly but approaching your freeholder directly and asking how much he will want in order to let you extend your lease. This second route is known as an informal lease extension.

Informal Lease Extension

The informal lease extension will not provide any protection whatsoever to you with regards how the freeholder acts. The informal lease extension begins by communicating with the freeholder to see if he is willing to agree to you extending your lease. If so, you can then proceed to the negotiation stage and discuss the lease extension’s new terms, which will include the length of the lease, lease extension cost, and payable ground rent.

There are several benefits that you can get from informal lease extensions:

  1. Minimize the legal cost compared with the statutory cost. (no notice procedures)
  2. Quicker lease extension as no formal process is required to be followed.
  3. No criteria are needed.

The aim of this route would be to reach a mutual agreement. Both sides can negotiate and agree to change the lease terms. You can get a rough lease extension cost calculated by the lease extension valuation calculator online conveniently. With these online calculators, you can obtain an estimated lease extension cost that can be used during your lease extension negotiation process. The leaseholders who don’t have much time and money follow this procedure rather than choosing a statutory process and infusing themselves in professional negotiations for both parties. In this process, any party has the right to change the terms of lease extensions.

As there are no rules, no regulations in this method hence,

  • The freeholders can drag their heels to complete the process.
  • The landlord can ask for any amount of premium and the leaseholder would not be able to apply to the tribunal to determine a reasonable amount as no notices had been served.
  • The landlord can request extortionate professional fees and again the leaseholder would not be able to apply to the tribunal
  • The landlord can simply choose to walk away at any time thereby wasting valuable time.
  • The freeholder has more advantages under this route and that is why the freeholder will usually try to convince a leaseholder to go down the informal route..

Statutory lease extension

The Leasehold Reform Housing and Urban Development Act 1993 controls the statutory lease extension process. Using this process, leasehold owners have the right to extend the lease of their flats. The leasehold owners are therefore urged to follow the statutory lease extension process. To extend the lease on your flat, you need to own the property for a minimum of 2 years.

The formal lease extension has the below list of advantages:

  • You can get a 90-year lease extension on top of your current lease term.
  • The payable ground rent will revert to zero.
  • The lease valuation date is frozen which means in the formal path, the premium value will no longer increase as the term decreases.
  • If you are on the formal path, you would be permitted protection when any dispute occurs. You have the right to take your case to the leasehold valuation tribunals(LVTs).

If you have owned the flat or house for a minimum of 2 years, then we recommend you to go with the formal(statutory) lease extension route. Get guidance from a professional leasehold valuation expert and carry out a lease valuation report. If you have not owned your property for 2 years then you have no choice but to go down the informal route. To get the best advice and guidance on lease extension valuation and lease terminology, you can schedule a 10-minute free consultation with our expert chartered surveyors at Leasehold Valuations.

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