The current situation with coronavirus has shut down a number of businesses and the majority of people are now working from home but this will not prevent you from extending your leasehold or purchasing your freehold.
We are still open for business. The implementation of our contingency plans means that we can continue to operate without disruption so we are able to take your instructions and progress your matter through both video calls and emails. We work with a number of surveyor firms whom can carry out a desk valuation of the lease or freehold premium for the purposes of leasehold extensions and freehold purchases.
David Goldstone of Capital Leasehold Chartered Surveyors states “if you have the funds available, now is a very good time to make a lease extension claim or to buy the freehold due to the lower values and the weaker market due to the pandemic.”
How can I extend my lease?
The usual procedure for extending your lease is the statutory procedure set out under the Leasehold, Housing and Urban Development Act 1993. By extending under this procedure, your lease is extended by ninety years in addition to the remaining term on the lease. The ground is also reduced to “peppercorn”, which is a low or nominal value.
The issue of ground rent in leases is a particular issue with lenders as a number of lenders are unwilling to provide a mortgage for a property that has onerous ground rent clauses. Leases which have ground rent clauses that double at certain anniversary dates within the lease, such as at every 20 years, are often not acceptable to lenders. Ground rent clauses that increase in line with the RPI Index are also now becoming unacceptable for some lenders. Leases that have such ground rent clauses in their leases may therefore have their market value reduced and/or have increased difficulty in being sold.
The benefits of extending your lease under the statutory procedure are that by increasing the term of the lease, the value of the leasehold should increase accordingly in line with the property market. Further to this, by removing any onerous ground rent clauses, the leasehold value may also increase as well as increasing your ability to sell the leasehold due to it being more acceptable to lenders.
Can I purchase the freehold?
The Leasehold, Housing and Urban Development Act 1993 also sets out a procedure for leaseholders to group together to purchase the freehold of the property from the freeholder. Leaseholders often form a limited company and purchase the freehold in the company’s name with the leaseholders being the shareholders and directors of that company.
By purchasing the freehold, the leaseholders will have control of the freehold and can make decisions concerning the freehold such as maintenance and improvements at their discretion as opposed to relying upon a third party freeholder. The leaseholders may also grant each of their individual respective leases with a term of 999 years at a zero premium. This is the longest term that a lease may be granted for and should increase the value of the leasehold in addition to having a share in the freehold.