Property management companies have this burden of making sure that all the tenants sign an up-to-date lease agreement. If you, as an individual, own a rental property, it's of utmost importance that your tenant sign a well-drawn lease agreement that contains no flaws. We can help with all your lease extensions duties to ensure that your property is always on top of the market. Also, if you own a leasehold property, it is inevitable that you will at some stage need to extend your lease, especially if you are looking to sell your property.
Most lenders will not lend on a property with a remaining lease term of 85 years or less and in fact there is a cut-off of 80 years at which point it would be near impossible to obtain a loan from a bank or building society on the property. Additionally, the lower the remaining term, the more expensive the extension will be.
You first start by obtaining a valuation of the premium from a valuer who is experienced in lease extensions.
The “marriage value is a component that applies when the term of the lease falls below 80 years.
For the process, we can say, if matters can be agreed upon outside of the Act we can avoid serving a Notice of Claim
Within two months of from service of the Notice of Claim, the land landlord has the opportunity to file a Counter Notice.
You first start by obtaining a valuation of the premium from a valuer who is experienced in lease extensions. The price you will pay the landlord for your lease extension is calculated on the basis of the value of the property you are renting, the ground rent payable on the property and the number of years remaining on the Lease, and there may be a few unnamed factors that can affect the price.
This premium is determined by a formula spelt out under the Leasehold Reform, Housing and Urban Development Act of 1993, which can be interpreted differently. Therefore, the figure proposed by the landlord’s surveyors will inevitably tend to be more than that recommended by the tenant’s surveyors.
The “marriage value is a component that applies when the term of the lease falls below 80 years. This refers to the increase that occur when you extend a lease and the value of the sum of the leaseholder’s and landlord’s interests in the property rises. If the term is less than 80 years then marriage value is calculated and 50% of it must be paid to the landlord, but if the term is 80 years or more then the “marriage value” is automatically nil.
That’s why it’s important to always extend the lease before it hits the 80 year mark because it can make a substantial difference to the amount you have to pay.
If matters can be agreed upon outside of the Act we can avoid serving a Notice of Claim but in most cases landlords are well aware of the provisions of the relevant Act and they will string matters out for as long as possible in the hope of recovering a higher premium. It’s therefore not recommended to negotiate outside of the Act but rather to serve a Notice of Claim firstly under the Act, and the negotiation can follow.
Within two months of from service of the Notice of Claim, the land landlord has the opportunity to file a Counter Notice. A period of negotiation of up to two months is allowed for the parties to engage in constructive negotiations with a view to settlement.
Unfortunately, we will not be able to agree upon the premium that you have to pay for the lease extension. In the absence of agreement, the First-Tier Tribunal will determine the premium to be paid and after a two month period of negotiation, we would advise that we make an application to the First-Tier Tribunal (Property Chamber) (“FTT”). Your surveyor and your landlord’s surveyor will continue to negotiate in respect thereof in the meantime. If an agreement can be reached on the premium and the rest of the terms of the lease extension, this will be for a period of 90 years in addition to the period remaining under your current lease.
Furthermore, you will be responsible for the payment of the landlord’s legal fees and surveyors costs as well as your own.
The initial fees for preparation and service of the Notice of Claim will be £500 plus 20% VAT. If an agreement is not reached and if the case has to proceed to the Hearing before the FTT, our fees would be approximately £3,000.00 plus 20% VAT for everything plus the Landlord’s legal and surveying fees. But going as far as an FTT hearing is usually rare unless the parties are very far apart on their valuations. In addition, an extra £300 will apply if we have to go to the FTT. These costs will obviously be much less if matters can be agreed at an early stage.
In case matters are agreed or the premium to be payed determined by either the Court or the FTT, we will take care of the completion of the new lease. Our fees for this will be around £500.00 plus 20% VAT and Land Registry fees.
The legislation provides a guideline influencing the timescale for lease extensions. This means we cannot give a precision on the timescale of your claim, as this depends on the position taken by your landlord and Court or the First-Tier Tribunal (“FTT”) availability as necessary. A claim of this nature can take up 12 months or more to conclude.
The registration of the lease extension can take 6 to 12 months at the Land Registry once the lease has been completed. That’s why we suggest that you let us know as soon as you decide to sell your property or re-mortgage so that we can start the process the soonest.