If you own a Wimbledon flat or apartment, chances are it is a leasehold property. Even if you have a good number of years left on your lease, it is worth understanding the process for extending your lease – known as leasehold enfranchisement. We look at when you might need to think about extending the lease on your flat, how you might go about it and a few other things you need to know besides.
There are two main types of homeownership in England; freehold and leasehold. Whether a home is on the market as freehold or leasehold is one of the first questions you should ask when viewing the property. Most London flats are sold as leasehold, but leasehold houses are sometimes on sale too.
When you buy the freehold, you are buying the property and the land on which it is built. Buying leasehold gives the purchaser the right to occupy the property for the number of years specified in the lease ? ?the term?.
A key thing you need to check before viewing a property is the lease length – as lease terms can vary dramatically.
A flat?s original lease is likely to be for a long period, which far exceeds the number of years its first owner would live there. As properties get older, and pass between owners, the length of time remaining on a lease is reduced.
Ownership of a leasehold home will revert to the freeholder once the lease runs out so as the number of years left reduces, so does the value of the Leasehold property. Furthermore, as the term of the lease gets shorter, the premium payable for the extension of the lease increases. Most mortgage lenders will require a lease term to be as long as the mortgage term plus a further 50 to 75 years, so anyone buying a flat with a lease of fewer than 80 years remaining may find it harder to obtain a mortgage.
However, under the 1993 Leasehold Reform, Housing and Urban Development Act, flat owners are entitled to a 90-year extension to their lease for a fair market price, as long as they have owned the property for at least two years. This means that you will pay a premium to obtain an additional 90 years to the existing term and the ground rent will be reduced to a peppercorn. If your lease has less than 90 years left to run, you really should think about extending it, not only in case you need to sell or re-mortgage but also because a lease term above 80 years does not attract marriage value. This is the increase in the value of the flat attributable to the fact the lease has been extended. This has to be shared equally between the parties.
You should start by appointing a solicitor with experience of leasehold enfranchisement as well as a professional surveyor, who will give you a valuation for the cost of the lease extension (the premium).
You or your solicitor should then serve the freeholder with a Section 42 notice, Under the 1993 Leasehold Reform, Housing and Urban Development Act, which informs the freeholder of your wish to be granted a lease extension and the amount you propose for the premium. You will need to specify when your landlord should respond to you with a counter-notice ? this must be no less than two months from the date you served the original notice.
You may be asked to pay a deposit of ?250, or 10% of the premium set out in the Section 42 notice if it is more. The landlord has a right to access your property to conduct their own valuation.
You will be liable to pay your own and your landlord?s legal and valuation fees.
The landlord must respond to you with a counter-notice, stating whether they accept your terms. You will then enter negotiations until terms are agreed by you both.
It isn?t necessary to take this legal route if you can negotiate terms with your landlord informally. However, it is still advisable to have an independent valuation and legal advice before agreeing to anything – to make sure you are receiving the most favourable terms possible.
How long the process takes depends on lots of factors, including the speed of communication between you, your solicitor and your freeholder and the surveyors appointed by both parties but it can take a number of months.
Disputes between the landlord and leaseholder can be referred to an independent body known as the First-Tier Tribunal.
Depending on the amount of time left on your current lease, leasehold enfranchisement can definitely be worth it. If you allow the length of time on your lease to drop below 80 years, the process becomes much more expensive because of the requirement to pay marriage value and the property may become hard to sell, if you need to, because of the difficulty of a buyer obtaining a mortgage on it.
If you live in a leasehold property, an alternative to extending a lease is to get together with your fellow leaseholders and buy the freehold. This is known as collective enfranchisement.
You will need to get at least 50% of leaseholders in your block to agree to participate for the collective enfranchisement to go ahead.
If you would like further information or advice about enfranchisement Andrew Scott Robertson have a specialist surveyor who is an expert in these matters and will be pleased to talk about the issues and advise you on your personal circumstances. Please contact us.
If you are looking to buy or sell property in Wimbledon, whether freehold or leasehold, Andrew Scott Robertson are local estate agents. We would be happy to discuss your requirements and show you our selection of properties. Please contact us today.Tags: commercial, freehold, leasehold, property
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