Written by What Is Leasehold Enfranchisement?
Leasehold enfranchisement allows leaseholders to extend their lease or, in some situations, buy the freehold alongside other leaseholders. This process is relevant to those who own leasehold properties – properties where ownership is limited to a set term, usually between 90 and 120 years, but sometimes up to 999 years. When a lease term is long, it often holds good market value. However, when the lease approaches 85-90 years or fewer, its value can decline rapidly, potentially increasing the costs associated with extending it.
Why Extend a Lease?
If your lease drops below 80 years, the cost to extend generally increases, thanks to an additional fee known as the “marriage value.” To protect leaseholders, the Leasehold Reform, Housing, and Urban Development Act 1993 grants the right to extend your lease or even purchase the freehold. Extending the lease sooner rather than later can preserve your property’s value, ensuring it remains a strong investment.
Steps to Extend a Lease
The process of leasehold enfranchisement can be complex, so it’s crucial to have professional guidance. Here’s a step-by-step overview:
- Discuss Terms with Your Landlord
Start by speaking with your landlord. An informal conversation can give insight into the terms they may accept. However, always seek independent legal advice to ensure that any informal terms align with your interests and maximise your benefits. - Hire a Valuation Surveyor and Solicitor
A professional valuation surveyor can assess the cost of extending your lease, while a solicitor experienced in leasehold enfranchisement can guide you through the legal procedures. Often, solicitors can recommend reliable valuation surveyors, and vice versa. - Make a Formal Offer with a Section 42 Notice
If informal negotiations don’t yield favourable terms, you may need to issue a Section 42 notice, a formal request for a lease extension. This notice should include a realistic price for the extension, and it requires careful planning with a solicitor’s help. - Pay the Deposit and Allow Access for Valuation
Some landlords may require a deposit of £250 or 10% of the premium listed in the Section 42 notice. Additionally, landlords have the right to access the property to conduct a valuation. - Receive and Review the Counter Notice
The landlord must respond to your offer with a counter notice within two months of your Section 42 notice. This response will outline any points they accept or reject. At this stage, you may enter negotiations to finalise the terms. - Negotiate or Escalate to Tribunal if Necessary
If terms can’t be agreed upon after the counter notice, either party can escalate the case to the First Tier Tribunal for resolution. This legal body will make a final determination if negotiations reach an impasse.
Costs Involved in Leasehold Enfranchisement
The premium to extend a lease is influenced by several factors:
- The property’s market value
- Years remaining on the lease
- Annual ground rent amount
In addition to the premium, leaseholders should budget for both their own and the landlord’s legal and valuation costs. Professional advice is essential for assessing the “realistic” premium to propose, as well as to ensure that all legal requirements are met.
Get Expert Help
Navigating the leasehold enfranchisement process can be challenging, but with the right professionals, it’s manageable. Solicitors who specialise in leasehold matters, such as those at Ashworth’s, offer expertise in everything from eligibility checks to cost assessments and statutory compliance. Skilled professionals will ensure that your interests are protected at every step, making the process smoother and more predictable.
Whether you’re extending a lease on a home you love or securing your investment’s long-term value, leasehold enfranchisement is a worthwhile endeavor for any leaseholder.
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