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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.

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.

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.

What Happens When the Lease Expires on a Leasehold Property?

What happens when the leasehold expires?

In England, mostly all residential flats are leasehold as well houses are freehold properties. When the leasehold expires, the property reverts to a freehold property, where it is under the ownership of the freeholder in addition to you no longer having the right to stay there. Further, you can buy a new leasehold property, or generally, if you still want to stay there then you should not let it expire and should extend the lease earlier before the time clocks.

 

What happens if the lease is not renewed?

There are several possibilities in which your lease is certainly not renewed. 

  1. When a landlord decides to end a lease, they may send a lease non-renewal notice to their tenants. The non-renewal notice must be provided to the tenants on hand(in written). The landlord must not give any reason for ending the lease. Hence, the landlord will let you know if they want to end the lease further.
  2. Another possibility is your landlord wants to change your lease agreement plan with some new labels for which he/she would inform you.
  3. As a leaseholder, you should decide before a month about how you need to proceed when your current lease ends. You can discuss with your landlord how they will proceed further when the lease expires.

 

How to extend a lease on a leasehold property?

If you own a leasehold property or flat, you have the right to extend the lease with specific criteria. There are two simple ways of extending the lease: Formal and Informal. In the formal way leaseholder and freeholder both need to follow a firm procedure stated in the law. By following this way, the leaseholder will get more benefits and security. Another alternative method of extending the lease on a leasehold property is to approach the freeholder and decide whether to conduct a lease extension negotiation. If the freeholder accepts the approach, both parties will have to negotiate. 

A lease extension is a confusing task. We suggest you consult a Leasehold Valuation expert as professional valuation advice is crucial for extending a lease. Are you worried about extending the lease on your flat? A complete step-by-step Lease extension Guide will be right for you.

 

Can the landlord kick you out after your lease is up?

A landlord cannot end up your agreement directly after the lease is expired. The landlord can provide a 30 days notice period to end up with the lease agreement and follow specific procedures before they want to evict a tenant. The tenant must be provided with a notice period until which they can find another way out.

 

Can the tenant refuse to renew the lease?

The tenant has the right to not renew the lease with or without any legal reason. Even if the landlord wants to renew your lease agreement, he/she doesn’t have the right to renew it.  

 

Do you have to move out the day your lease ends?

Once the lease expires, you should move out and leave the house. If your lease ends on a specific day, you should move out before the day ends. 

 

Do you need to give notice if your lease is expiring?

If the tenant does not want to renew the lease at the end of the lease agreement, they have the right to move out. In general, tenants must provide a 30 days notice period to the landlord before ending the lease.

 

Why leases are for 99 years?

Under notable common law, leases are for 99 years. The longest possible term of a lease of residential or commercial property.

 

Anxious about the lease extension cost?

It is very crucial to learn about the lease extension process before the calculation of lease cost. The lease cost is also a required term during lease renewal or lease extension. Many homeowners and our grateful clients have calculated their lease costs with our Leasehold valuation calculator, you can also get professional advice from our experts.

Whether you need to extend your residential lease, need to buy your freehold of a leasehold house, want to calculate lease extension cost, Leasehold valuation experts can provide you with all the solutions. Get lease extension advice, calculate lease extension cost, lease extension negotiation with our professional team, who can help you from valuation of leasehold property to a complete survey report.

Read more:

How To Avoid Stamp Duty For Second Property

Making Alterations To A Leasehold Property

Shared ownership Lease Extension

How to avoid the most common issues in Lease Extension in UK

The process of adding more years onto your lease is called Lease Extension. Due to the complexity of the lease extension valuation and the overall process, it comes with its own issues. Here we will discuss how to avoid the most common issues in Lease Extension in UK. Most flat owners and a fair number of house owners in the UK are long leaseholders. This means they do not own the freehold of their homes and are in a tenant/landlord relationship with the owner. Leases on flats or houses last normally up to 99 years or 125 years from when the property is built. After this, the property goes back to the freeholder. Lease extension in the UK can be carried out if you are an eligible leaseholder. The lease agreement holds the details about the rights on the property of the leaseholder and the freeholder. This arrangement comes with its fair share of problems. For example, if the duration of your lease falls below 80 years it can significantly decrease the value of your property and make it harder for you to sell it. Fewer mortgage lenders will be willing to lend against it.

Most common issues in lease extension

Lease extension in UK can be a daunting task and comes at a cost. You may use the lease extension calculator to find out the costs but the process of lease extension valuation calls for complex calculations considering the length of the lease, ground rent, value of the property when it is extended and various other factors. After the freeholder’s and the leaseholder’s surveyors have done their valuation it comes down to negotiations between the freeholder and the leaseholder. The Lease Extension Valuation calculator in UK can also get you an estimate of the lease extension costs. All this turns into a rather tedious process and takes an enormous amount of time. It is best to hire a solicitor to carry out the processes due to the legal documentation involved.

Issues with Informal Lease Extension

Keep in mind that current laws require the leaseholder to pay everything including the expenses of the solicitor and surveyors of both the leaseholder and the freeholder’s and obviously the premium. This is why it is sometimes tempting to skip the statutory process and strike an informal negotiation with the freeholder. This process can be faster and save expenses related to the freeholder’s surveyor. 

But it is important to note that taking the statutory route can make your ground rent negligible. On the other hand, making an informal lease extension runs the risk of increasing it. Making an informal lease extension also deprives you of the protection and security provided by the lease extension legislation. The freeholder may set the terms of the lease to his own liking, which may include increasing the ground rent. 

There is also the possibility that the freeholder may just extend the lease back up to 90 years or 99 years instead of giving you an additional 90 years. This means either you or a new owner may have to go through the entire lease extension process again.

When to extend a lease

If you are trying to extend a lease that has fallen below 80 years, it may burn a hole in your pocket because lease extensions get much more expensive after that period. So every year that you wait for your lease extension, the more expensive it gets. When it comes to selling your house, any new buyer will find it hard to be accepted for a mortgage when the duration of your lease has fallen below this level. So the number of years left on your lease is critical for selling or remortgaging your property. 

As per The 1993 Leasehold Reform Act, if you are a flat owner, you are entitled to a lease extension on your flat after you have owned the property for at least two years. You possess the right to extend the lease by 90 years and reduce the ground rent to zero. But if you own a house you only gain an additional 50 years upon extending the lease which makes buying the freehold a better option.

Issues with service charges

Services charges are the amount that the landlord charges from the leaseholders in return for providing maintenance and repairs to the property. The terms and conditions for these are laid out in the lease agreement. Service charges may include the cost of services like general maintenance, cleaning of shared areas, repairs, building insurance etc. This is one of the main areas where disputes are expected to occur between the leaseholder and the freeholder.

The service charges could either be fixed or set on a variable basis. Fixed charges are where the leaseholder is required to pay a fixed amount irrespective of the actual costs to the freeholder. The fixed charge is now usually a part of older leases because as costs increased due to inflation, the freeholders now prefer to charge based on the actual cost of the services to make sure they recover their costs every year. These charges may change from time to time and are called variable service charges.

Service charges may fluctuate but the freeholder is allowed to recover only a reasonable amount from the leaseholder and if at any point you find the freeholder being unreasonable with the amount he is charging you have the right to apply to the tribunal to challenge these service charges.

It is a good idea to find out what the current and future service charges are going to be for a leasehold flat that you are about to buy.

Preparing the Tenant’s notice

The process for a lease extension starts with the valuation and then to service of the tenant’s notice. Note that from the date of receipt of the notice by the landlord you are liable for costs incurred by the landlord concerning your lease extension. So make sure that there are no errors in your notice and that it is up to the mark and accurate. If the tenant’s notice is found incomplete, it becomes invalid and the landlord has the right to reject it. You may apply to the County Court to get this corrected but this will cost you additional money so it is best to avoid that from happening. 

It is recommended to register your notice with the Land Registry because, in the event where the landlord sells the freehold to another, the lease extension procedure can continue as though the new owner had received the original notice. 

It is best to instruct a solicitor to prepare the notice and serve it so you can avoid any mistakes which may lead to legal issues arising from it.

If you are looking for help with Lease Extension is Slough we are happy to help. Our team of chartered surveyors can help you successfully negotiate your lease extensions or enfranchisement. Contact us for a consultation today.

Valuation for buying the freehold of a leasehold house in the UK

At some point in time, you must have considered buying the freehold of your property. The house was originally sold to you on a leasehold basis. If you buy your freehold you get more control of your property. You gain more freedom in deciding what you want to do with the property and, if alterations are in your mind, how much you want to spend on them. Sometimes when you’re a leaseholder of a property, the ground rent and service charges that you pay to your freeholder can get inflated to exorbitant proportions. You could end up paying unreasonably high ground rent to the freeholder.

It is not only flats that have historically been sold as leasehold, some houses (new and old) have also been sold on a leasehold basis. Multiple limitations and unfair contract clauses with the freeholder can even impair you from being able to sell your property easily.

Under such circumstances, it is perfectly justified to buy the freehold of your property. You would certainly enjoy the freedom.

Check your eligibility

The Leasehold Reform Act 1967 (the 1967 act) gives leaseholders the right to buy the freehold of the property. The process of valuation of buying the freehold of a leasehold house in the UK is also known as ‘Enfranchisement’ or ‘Freehold Enfranchisement’ where the leaseholders themselves become the freeholders of the property. However, there are a few requirements you need to meet for being eligible to buy the freehold of your leasehold house.

Valuation for buying the freehold of a leasehold house

Once you have checked your eligibility you need to calculate the price for buying the freehold of the property. Now, this price depends on several different factors and since the rules for calculating the price have changed through various amendments made to the 1967 act, it is quite complicated to calculate the price by yourself. It is recommended to get professional help from a surveyor to get a fair estimate of what you should be paying for the freehold.

Methods of Valuation

There are two different methods of valuing the house under the 1967 act known as ‘Original Valuation’ and ‘Special Valuation’ you can also use a freehold calculator for houses. Under relevant sections of the 1967 act, these are mentioned as

Section 9 (1) – the house will be valued based on the original value of the site known as the Original Valuation basis

Section 9 (1A), (1C) – the house will be valued on the Special Valuation Basis which includes a part of the marriage value.

Which of the above two valuation methods is applicable on your property depends on the qualification criteria and you or the landlord have no say in it.

The house will be valued on the Original Valuation basis if under Section 9 (1) of the 1967 act if the house meets the value limits and the lease qualifies the original low-rent test. Otherwise, in all other cases, the property will be valued according to the Special Valuation Basis, including cases where the lease has been extended under Section 14 of the 1967 act.

To get a reasonable idea of the prices for buying the freehold of a leasehold you can also visit our freehold of a leasehold house calculator.

After the Valuation

When the valuation is carried out or after using a freehold calculator for a house, irrespective of the method used, the price for the freehold is valued as being sold in an open market to eliminate any biasing towards either party. The motive of the 1967 act is to maintain fair trade between the leaseholder and the freeholder and provide adequate compensation to the freeholder for the loss of their property. The act does not aim to help the freeholder drive a bargain in his favor. The property is valued according to the open market price to ensure the freehold is transferred at a fair price to the leaseholder. Using the Special Valuation method does drive up the cost of the freehold when compared to the Original Valuation basis, so it is better to work out the details beforehand.

After the valuation, you may open up a dialogue with the current freeholder for negotiating the prices. If both parties settle on a price, the documentation may be completed. However, in cases where a settlement cannot be reached, the First-Tier Tribunal can be involved. The Tribunal acts as an unbiased third party and its role is not to rule in either the leaseholder or the freeholder’s favor. It makes an independent decision so the prices decided by the tribunal may not reflect what you or the freeholder may have decided.

You as a leaseholder have to start the process by issuing a formal notice of claim to the freeholder. It is important to seek professional advice from a valuation surveyor with good knowledge of the market so you know what costs you are going to incur before you initiate the process.

If you are looking for a lease extension in Slough, UK contact us for any kind of assistance. Our team of chartered surveyors can help you successfully negotiate your lease extensions or enfranchisement. Give us a call for a consultation today.

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