For most of us, the biggest asset we will own in our lifetime is our home.
Yet whilst we might regularly review the documentation linked to our car, it is much less common to review the title documentation linked to our property.
However, if our home is a leasehold flat, or even a leasehold house, reviewing documentation becomes very important indeed. This is because a lease is a depreciating asset and therefore must be preserved.
Leases were originally sold on the basis that when the lease expired, ownership of the land – including the leasehold property – would revert back to the freeholder. With a typical lease running for 99 years, leases that were granted in the 70s, 80s or 90s, unless already extended, have begun to run quite short. Some are down to 70, 60 or even 50 years.
Unfortunately, once a lease has fallen below the 80-year mark, extending the lease can be expensive, especially in areas of prime real estate. It’s surprising how many people are unaware of this and get caught out. If you check your lease and discover it is below the 80-year mark it is important to seriously consider extending your lease. If your lease is a few years off the 80-year mark, while the same urgent need may not apply, it is advisable to consider applying to extend the term of years, especially if you are wanting to sell your property in the near future.
For those looking to extend their lease, there is legislation that provides some structure on how to do so, including the right for a tenant to make a claim to extend their lease. You also have the option of extending your lease by agreement with your landlord or the freeholder, depending on who is able to grant the lease extension.
Unfortunately, current legislation surrounding leasehold enfranchisement is complex with the Law Commission itself describing it as “complex, inconsistent and costly”. For this reason, a review is currently underway with the aim of providing a better deal for leaseholders. With this in mind, the Law Commission is reviewing a leaseholder’s rights to:
- Purchase the freehold of their house,
- Participate, with other leaseholders, in the collective purchase of a freehold group of flats,
- Extend the lease of their house or flat.
Reform is undoubtedly on the horizon with the Law Commission’s recommendations expected to be finalised this spring – to what extent, remains to be seen. In the meantime, if you are a leaseholder there are a number of things you can do:
- Check your lease to see the number of years remaining on the term,
- Speak to your local estate agent who can advise what your property is worth with its current lease term, and what it could be worth if the lease was extended,
- Speak to a lawyer who specialises in leasehold enfranchisement to see what steps you can take to extend your lease. Your first consultation is usually free.
There is also the option of acquiring the freehold from your landlord. In effect, this means you become your own landlord and can take a much more active role in managing the building. This is something worth discussing with the other flat owners in your building to see if they would be similarly interested. If enough people are interested, you can make an application to acquire the freehold from your landlord.
If you live in a leasehold property or are considering purchasing a leasehold property and would like advice, please don’t hesitate to get in touch.