Lease extensions and collective enfranchisement

The law gives rights to qualifying long-leaseholders of residential properties to significantly extend the term of their lease or to collectively acquire the freehold; this area of work is known as leasehold enfranchisement. Whilst this follows a set procedure it can be a complex matter and the valuation of the lease extension premium or the freehold acquisition is an area of work routinely undertaken by Kingston Morehen. We are regularly instructed by leaseholders and freeholders to provide valuation advice and to negotiate premiums with the other party’s Valuer, including representation at the Residential Property Tribunal.

Lease extensions under the Leasehold Reform Housing and Urban Development Act 1993 take the form of a 90 year period added to the remaining term of the lease and no ground rent is payable to the Landlord for the whole of the term.

The statutory basis of calculating the premium includes an element known as Marriage Value, but this only applies where the lease has less than 80 years to run. When a lease term approaches the 80-year threshold the value of the leasehold interest starts to decline noticeably and the cost of extending the lease becomes comparatively more expensive the further below 80 years the length falls. It is normally best to extend your lease as soon as possible, and ideally before the term reduces to 80 years. Many mainstream mortgage lenders now have strict policies concerning the minimum length of a leasehold interest against which they will lend, some requiring at least 85 years, and this means that having a short lease could reduce the available audience of prospective buyers.

As well as receiving sound Valuation advice it is important to involve a Solicitor that is experienced in leasehold reform work, particularly as timescales must be understood and adhered to.

Kingston Morehen is a member of the Association of Leasehold Enfranchisement Practitioners (ALEP)