So you own a flat and want to extend your lease. Like many people you might think you can get a better deal by going direct to your freeholder, rather than bothering with a statutory notice. But beware, you can get badly caught, as Solicitors often discover.
Some people think writing to their freeholder to see if they will agree an extension voluntarily is less confrontational than serving a formal notice, or feel writing direct will save money on legal and surveyors fees.
However getting a professional valuation doesn’t just tell you how much a lease extension costs. Once obtained and used as the basis for serving a proper notice (which Fridaysmove can speedily arrange naturally) can save you money in the long run.
For example, if having approached your freeholder direct, your freeholder replies to say that they are prepared to grant an extension, how will you know if the deal they offer is as good as you could get by going through the statutory procedure? With a professional valuation, you will have the comfort of knowing that the premium proposed by your freeholder is (or is not) fair. By fair I mean in line with the market value.
But even if the premium is reasonable, does the freeholder intend to insert all sorts of new provisions in the lease which will make it a less attractive proposition to buyers in the future?
All too often when the leaseholder’s Solicitor receives the new lease document from the freeholder’s Solicitor it is found that the freeholder wants to make substantial changes to the lease, which may affect its future value.
A new lease made under the Leasehold Reform Act 1993 has to be in accordance with the provisions of the Act. If no statutory notice is served the freeholder can lay down whatever terms he wants.
These are some of the things which Solicitors often encounter which would not have to be agreed in an extension under the 1993 Act:
- Substantial increases to annual ground rent
- Extension for less than the full 90 years provided by the Act
- Rent review or rent escalator clause added to provide for regular increases in ground rent
- Removing part of the property from the lease, e.g. garden or parking area
- Leaseholder made responsible for additional items in service charge clauses
- Adding new onerous covenants by the leaseholder
If you agree an extension on terms that are less satisfactory than those which would have applied under the 1993 Act, this can affect the value of your property, and make it harder to sell. In the present property market buyers are looking for the best deal, so a lease which has been extended on unsatisfactory terms won’t help you sell.
Fridaysmove recommends applying for a lease extension under the provisions of the 1993 Act. This avoids any of the difficulties which can arise when a freeholder wants to impose unreasonable terms, and is essential when there are problems such as a missing freeholder.
You will have to pay the freeholder’s costs in any case, so you might as well get the benefit of proper advice from a RICS surveyor and a qualified Solicitor rather than embarking on action and getting a bad deal at the end of the day.
How much does a lease extension cost? – Our lease extension calculator is a great place to start