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Does it pay to have an extension?

By now the falling prices of property as reported extensively in the press and by various lenders will not have escaped your notice. There is speculation that the reduction in values will continue for some while longer.

However, the current downturn is not all bad. On the plus side the fall in market value may mean less to pay for a lease term extension or collectively acquiring the freehold in which you’re flat is located by exercising rights pursuant to the Leasehold Reform, Housing and Urban Development Act 1992 (as amended) (1993 Act)

Why extend your lease now?

Consider the following example*:

   

2008 
2007
Current value of Flat  £300,000
£350,000
Set yearly ground rent
£200
£200
Date of 99 year lease
25th March 1987
25th March 1987 (78 years left)
Likely price £10,000 - £13,000  plus costs


£12,000 -£15,000
plus costs

*The above is a general calculation and does not obviate the need and importance of obtaining professional valuation advice.

 

It is becoming clearer that the fall in current property values could provide some with the opportunity to pay less for a lease extension which will in the long run add value to their property. The same may also be true when calculating sums payable to collectively acquire the freehold.

The question many of you may then be asking is “do I qualify to extend my lease”?

Qualification

Essentially, to exercise your rights and extend your lease the following applies:

  1. The current lease was originally granted for a fixed term exceeding 21 years
  2. You must have owned the lease for the past 2 years.

If you do meet these criteria you are then it is more than likely that you are entitled to serve what is called Notice of Claim pursuant to the 1993 Act. The Notice must contain details of the lease, the price you are proposing to pay for the lease extension, the new terms you are proposing etc and the date whereby the landlord must give a Counter Notice.

The service of the Notice and procedure under the 1993 Act should enable you to acquire a new lease to be granted for a nominal ground rent for the whole term and that the new term shall be for a period of 90 years plus the present unexpired terms.

It is evident therefore that the current depressed market can make happy reading for those who are shrewd enough to think in the long term and start the process by which you can add value to your property while all those around you depreciate in worth. For assistance in doing so please contact Colman Coyle.

Author: Hema Anand

Publication: Angel and Northwest magazines

Date: November 2008