If you own, or are about to purchase, a leasehold flat it is important that you understand the implications of being a leaseholder.
Rather than owning the building, or part of it, you have a contract with the landlord giving you conditional ownership for a fixed period of time. The period of time that remains unexpired on the lease has a significant effect on its value. A flat with a short lease can be difficult to sell.
Under the terms of Leasehold Reform, Housing and Urban Development Act 1993 (as amended) if you have owned your flat for at least two years, whether you have ever lived there or not you are, in most cases, entitled to extend your lease. The lease extension will be for a term of 90 years in addition to your existing unexpired lease term. No ground rent will be payable for the entire term.
The majority of leasehold properties would initially have had lease terms of between 99 and 125 years. If the lease was allowed to run its course ownership would revert back to the Freeholder at the end of the term. In reality the unexpired term of the lease usually gets extended by the leaseholder before it reaches that point but the Freeholder must be compensated for the loss of that reversion, future ground rents and a third component known as marriage value.
Marriage value is the potential for increase in the value of the flat arising from the grant of a new lease and under the terms of the act gets divided equally between the Freeholder and the leaseholder although If there are more than 80 years unexpired on the lease term the act states that marriage value will be disregarded.
If you live in or own a leasehold flat you should consider extending the lease while the unexpired term still exceeds 80 years as once it falls below this point the price of an extension can increase fairly substantially.
If you are unhappy with the figure that you are being quoted by your Freeholder for extending your lease you have the right to challenge it. If an agreement cannot be reached the matter is referred to the Leasehold Valuation Tribunal who will make a judgement. You will be responsible for your Freeholder’s reasonable costs from when the initial notice is served. The amount payable for a lease extension can be calculated by a Chartered Surveyor specialising in this work. If you would like advice on extending your lease do not hesitate to call us on 020 8445 8508.
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Copyright © 2015 Jeremy Leaf |
By: Haarty Hanks
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