The Crown Estate holds the freehold to a significant number of properties that are subject to residential leases. Leaseholders who are resident on the Crown Estate often have the benefit of living in some of most attractive properties, the majority of which are in an around London whether around the Royal Parks, Victoria Park or Eltham.
The Crown Estate is not however, subject to the Leasehold Reform legislation generally. With the majority of the property that it is within its estate, as a result of policy decision, it will act by analogy to the relevant legislation so as to ensure that its leaseholders continue to be able to benefit from the legislation to either acquire an extended lease, buy the freehold to the block (flats) or of the freehold to their house.
The effect of this for its leaseholders is that a leaseholder or group of leaseholders can apply for an extended lease or the freehold of the block of flats or house by service of the relevant statutory notice under either the Leasehold Reform Act 1967 or the Leasehold Reform Housing and Urban Development Act 1993 and the Crown will act as if it is subject to the Leasehold reform legislation and serve a counter notice either admitting the claim for the lease extension of a property for a new term of 90 years plus the current unexpired term or to dispose of the freehold.
However, the rights of leaseholders to either extend their leases or acquire the freehold to land will be refused by the Crown where the property in question is in or intimately concerned with the Royal Parks and Palaces or where the properties have particular association with the Crown. These areas are described as “Excepted Areas”. In London the Excepted Areas are concentrated around Hyde Park, Regents Park, Richmond Park, Hampton, Egham and Eltham.
Within the Excepted Areas the Crown will agree to grant leases of properties, either houses or flats, subject to the leaseholder following a similar process as that which is set out in either the Leasehold Reform Act 1967 or the Leasehold Reform Housing and Urban Development Act 1993 and meeting similar qualification criteria to be able to bring the claim. The qualifying criteria is broadly that the property in question is held on a “long lease”, in that it was granted for more than 21 years at the original date of grant and that the leaseholder making the application has owned the property for more than 2 years.
The valuation principles in respect of any application for a new lease of a property within an Excepted Area similarly follows the same principles in respect of the property. Specialist valuation advice should be obtained from a surveyor who is experienced in dealing with such applications.
The term of the new lease will usually be for a maximum of 150 years and where there is an intermediate lease the new lease will take the form of an overriding lease. The main difference from the usual processes is that the new lease will be granted at a new modern ground rent which can in some circumstances be substantial.
Once an offer has made to the Crown’s representatives for a lease extension of the property and a counter offer has been made by the Crown, the leaseholder has 6 months to agree terms and then following agreement on the price payable, 2 months to agree the form of the new lease and complete. If agreement cannot be reached on the terms of the new lease within the 6 month period, there is the ability for the premium to be determined by arbitration but the costs associated with such an application can be substantial.
If the deadlines set by the Crown in the guidelines for applications are missed, it can affect the ability of the claimant to be able to extend the lease of the property which can be expensive.
When considering pursuing an application for a new lease of property in one of the Crown’s Excepted Area’s, specialist advice should be obtained.
Chris Macartney is a Partner in the Landlord & Tenant department at Bishop & Sewell, which has expertise in Leasehold Reform matters and has particular experience of making applications in Crown Excepted areas for extended leases.
If you own property in one of these areas and would like to know more about the process involved in making an application for an extended lease please email Chris Macartney on [email protected] or by telephoning 020 7631 4141 and asking to speak to a member of Landlord & Tenant team.
