Tim Bishop Tackles Four Of The Questions Most Frequently Asked By Flat Owners.
When it comes to lease extensions, most flat owners understand the basics but there are some aspects that are always flagged up.
As solicitors specialising in lease extensions, we receive about 10 calls every day from leaseholders wanting to know more about the process. Some aspects of extending a lease come up time and time again, so here are four issues that continually cause consternation among our clients.
Can my freeholder withdraw from the transaction?
This is an easy one. If you’re going down the formal statutory route and have served the relevant legal notices (Section 42), then your freeholder has little say in the matter and can’t pull out. However if you proceed with the more risky private or informal route to extend your lease, then you are very much dependent on your freeholder’s goodwill – and there’s nothing you can do to stop them pulling out at any stage.
Beware of unscrupulous freeholders – who have been known to offer full co-operation, only to pull out either when the remaining lease term drops below 80 years [when the marriage value kicks in and the price of lease extension premium increases] or just before exchange, only to ask for an inflated premium.
Do I really need a specialist lease extension valuation?
Broadly you have four options when it comes to valuing the premium;
- A full valuation carried out by specialist surveyor involving a flat inspection. This is the option we always recommend. If you go down this route, do make sure you get a specialist surveyor with plenty of expertise in this area, not someone who has done only the occasional lease extension. See panel on P49 about choosing the right professional advisor.
- A desktop valuation – this is often a cheaper route and is certainly the second-best option. However it will never be as accurate as a full physical inspection and could miss out critical factors which could reduce the premium you need to pay.
- Relying on an online calculator – these do have some use in giving you a rough approximation of the kind of premium you are looking at, but we never recommend relying on them – they are far too inexact. By sticking with just an online calculation, you could end up paying well over the going rate. When it comes to selling your house or flat, would you rely on a verbal valuation from the bloke you met down the pub? No. So don’t rely on an online calculator for your lease extension valuation either.
- Doing without any sort of valuation – don’t even think of going there. You are entirely at the mercy of your freeholder and none the wiser if they propose an exorbitant premium. Also, if you are following the formal route for your lease extension, you could invalidate your statutory Notice if your offered premium is too low.
How long will it take?
This is a difficult question, akin to how long is a piece of string. However, in general terms, if you go down the Statutory route then, however efficient your solicitor is, you should expect it to take around six months.
Going down the informal route can be much quicker – but you really are entirely in the hands of your freeholder.
Can I put my flat on the market now?
In theory there is nothing to stop you doing so, but depending which lease extension route you’re taking, you might be storing up problems for yourself.
If you’re going to serve a Section 42 Notice, putting your flat on the market now should not be a particular problem as you can assign the benefit of that notice to your vendor on completion of sale.
However if you’re relying on the informal route, then unless you can get your freeholder to finalise your lease extension before exchange of contracts, you will probably find most sensible purchasers are unwilling to exchange or complete – unless you agree to a significant drop in price for a cash buyer.
And finally…
Don’t delay your lease extension. Not only does getting it out of the way now, mean you needn’t worry about delay or other problems when you come to sell your flat, but the big advantage in the current property market of acting now is that the price of your lease extension is going up rapidly.
You’re being hit by a double whammy – every day your lease is becoming shorter and is worth less, and rising property prices mean the cost of your premium is also going up. In fact a leading freehold investment company estimates that the cost of lease extension premiums is rising annually by a remarkable 12%.
So go ahead, start your lease extension today.
Tim Bishop is a Senior partner at Bonallack and Bishop, solicitors specialising in lease extension.
How do I find the right professional
To find a specialist surveyor, solicitor or managing agent that has lots of experience in this area, always use a member of ALEP (Association of Leasehold Enfranchisement Practitioners). The leading body representing this part of the industry. A complete list of their members appears in the directory section on page 64, or you can visit their website.
