Leasehold Enfranchisement
Whether you own a leasehold house, flat or maisonette and wish to purchase the freehold for your house or the collective enfranchisement for a block of flats, or an individual lease extension, then we are able to help with appropriate advice.
Residential house
Under present legislation of the Leasehold Reform Act 1967 a leaseholder who has owned a property for more than two years (you do not have to live at the property) has a right to purchase the freehold. There are different forms of valuing the freehold dependent upon the rateable value and if the property has a lease before 1990 and does not have a water meter then this information can be obtained from your water bill that is sent either every half of full year. In most instances leasehold houses are for 99 years and in certain circumstances can have what is classed as a head lessee interest as well as a freehold interest. This interest can be purchased at the same time as the purchase of the freehold and is certainly advisable.
Over the years that the original term has run down this has affected quite significantly both the value of the subject property and the saleability of the leasehold interest in the property. There are many instances now where prospective purchasers will have difficulty in obtaining bank or building society finance in order to purchase a property, in some instances now where leases have 70 or even 75 years remaining. Therefore, it is important, as soon as financially able, to purchase the freehold of a property, which in the majority of cases increases the value of the property significantly.
A valuation for a freehold reversion is specialised and is constantly affected by both changes in market conditions and changes in law affected by case precedents determining valuation principles and practices. We offer a full valuation and negotiation service concerning all aspects of freehold reversion of houses to both leaseholders and freeholders.
Lease extensions for flats/maisonettes
Due to the large number of flats/maisonettes that have been built, the majority from the 1950’s onwards, the leasehold system of ownership of residential flats has meant that the owners of flats hold their property for a certain number of years, normally 99 but in recent times these have been 125 years. Original leases were normally 99-year leases with relatively modest ground rents. With the original term running down with the number of years, this has affected quite considerably both the value and saleability of the leasehold interest in the property. This has also manifested itself further in that when purchasers or even owner occupiers require a bank or building society mortgage, the length of lease has a significant bearing upon this. It would now appear that lenders have specific policies in place on leasehold properties and require a certain number of years left unexpired after the period of the loan. The actual length of lease that lenders are prepared to accept on mortgages does, of course, vary from one lender to another, as well as the appropriate ground rent particularly relevant for newer leases that have been put in place over the last 20 to 25 years. There have been a considerable number of higher ground rents with rent review clauses that can have a potential detrimental effect upon the saleability/mortgage ability of a property even though the number of years remaining can be quite excessive, as in some cases anything from 90+ years remaining.
The valuation required for lease extensions is certainly specialist and is constantly affected by both changes in market conditions and changes in law affected by case precedents determining valuation principles and practices. We offer a full valuation and negotiation service concerning all aspects of the lease extension process to both leaseholders and freeholders and we will detail our services below.
Buying the collective enfranchisement of a freehold block
There is potential for a leaseholder not just to extend their lease but to collectively with other leaseholders within the block potentially purchase the collective enfranchisement, i.e., the freehold. The provisions of the Leasehold Reform, Housing and Urban Development Act 1993 provide leaseholders with a statutory right to compulsorily acquire the freehold interest and once acquired the leaseholders have the ability to extend their lease for any period they wish and this is usually to 990 or 999 years. Purchase of the freehold of the block can be agreed by mutual agreement once valuations have been obtained by the parties, however, probably more frequently than with the cases of lease extensions, the lessees pursue the freehold interest under statutory provisions. Further requirements and eligibility for leaseholders regarding this can be obtained by contacting our offices.
Valuation services
Any enquiry made by a lessee into extending the term of their existing lease or purchasing the freehold of their house requires at the outset a valuation to establish the amount of premium payable. We provide two options for this valuation:
Option 1 – Desktop Valuation Whether you are the lessee or freeholder, this is a cost-effective way of obtaining a valuation. We produce a full calculation based on obtaining a copy of the lease and provide guidance for a lease extension on a flat/maisonette as a Section 42 Notice is required accordingly. The value of the property is assessed using supplied information on the size of the property and researching professional property information databases. The freehold purchase for a house under the Leasehold Reform Act 1967 is taken as a guide to provide appropriate information to the lessee or freeholder.
Option 2 – Full Valuation This service includes a full inspection of the subject property and is certainly recommended for potentially high value properties and where the lease of the property is less than 40 years unexpired. A full valuation is also recommended where a Section 42 Notice has to be served on a landlord for a lease extension or is expected to be served by the tenant.
Negotiation services
Once you have obtained the necessary valuation, whether on a statutory formal basis or an informal basis, we can assist in negotiations to obtain the best value for money result. If this is on a formal basis, we may ultimately suggest proceeding to First Tier Tribunal and we have experience with regard to the application and ultimately the Tribunal Hearing.
Submitting an application to Tribunal, following the service of appropriate Notices and unsuccessful negotiation, would be the last resort, mainly due to the cost implications to both the freeholder and leaseholder. Our motto is always to look for the best possible “value for money” result.
If any of the above is of interest to you the please contact Andrew Perrin MRICS, Chartered Surveyor on 01922 627686 or ap@fraser-wood.co.uk or residential@fraser-wood.co.uk, or his colleague Steven Johnson MRICS, Chartered Surveyor on 01922 629000 or sj@fraser-wood.co.uk.
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