LEASE EXTENSIONS

We are Market Leading Experts in Lease Extensions

Joe Fraser Chartered Surveyors provide Expert, Lease Extension Valuations. Below we answer some of the key questions as to the process and how we can assist. Whilst intended to be accurate, the below summary is a brief overview and should not be treated as formal professional advice. We are often able to offer fixed fees and our lease extension valuations start from just £325+VAT.

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We are members of the Association of Leasehold Enfranchisement Practitioners (ALEP), and specialise in Lease Extension and Enfranchisement Valuations. We have successfully acted for Freeholders and Leaseholders and are experienced in negotiating successful outcomes for our clients.

Further information is available from the Leasehold Advisory Service:
https://www.lease-advice.org

JFCS are a market leading firm of Chartered Surveyors

FROM ONLY £325+VAT
Simple, fixed fees from only £325+VAT.
We are Lease Extension Specialists
Specialist, Lease Extension and Enfranchisement Chartered Surveyors.
Successful Outcomes
We achieve successful outcomes for both Freeholder and Leaseholder clients
Property Experts
Experienced in property of all values, from £50,000 – £5,000,000
Nationwide Coverage
Available to Act throughout England and with offices located in London and the North
Experienced Expert Witness Chartered Surveyors
We can provide both written and oral, expert testimony to the First-tier Tribunal
Instructed by Leading Firms
Regularly instructed by major specialist law firms on behalf of their clients

Book your Lease Extension NOW from ONLY £325+VAT

Contact us, to obtain a fee quote or proceed with a lease extension valuation. We will consider your circumstances, provide a fee quote and let you know whether the valuation will be prepared on a desktop basis, or whether an inspection is required. In most instances we are able to provide fixed fee quotes for the initial report and negotiations.

Once we receive your request, we will get in touch to discuss your requirements.

WHAT IS A LEASE EXTENSION

Leasehold flats become less valuable as the lease gets shorter, they are a depreciating asset. Once the term remaining reaches 85 years and less, it starts to become value significant affecting the value of the property and also the ability to obtain a mortgage.

Below 80 years, Marriage Value becomes payable, considerably increasing the premium payable to extend the lease.

A Lease Extension is the process where a leaseholder can extend their lease. Lease extensions can be formal, or informal.

An informal lease extension is where the leaseholder and freeholder will agree terms between them, the leaseholder will pay the freeholder a premium and in return the freeholder will agree to extend the lease on the terms that have been agreed.

A formal lease extension is one carried out in accordance with the Leasehold Reform, Housing and Urban Development Act 1993 (as amended). The ‘statutory’ route provides:

• The lease will be extended for a further term of 90 years (this is in addition to the existing term remaining);

• The ground rent will be reduced to a peppercorn (i.e. nil)

The leaseholder will be liable to pay the freeholder a premium, which is calculated in accordance with the Act.

The leaseholder will also be responsible for the reasonably incurred professional costs incurred by the freeholder; legal and valuation fees, as well as paying for their own professional fees.

The lease, the leaseholder and the property will need to meet certain criteria, in summary, the property needs to be a flat, the lease must be a long lease and the leaseholder must have owned the property for a minimum of two years.

Lease Extension Premium Calculation

A formal lease extension is calculated in accordance with the Leasehold Reform, Housing and Urban Development Act 1993 (as amended) and usually comprises three main elements;

1

Ground Rent

Calculating the value of the loss of the ground rent. After a statutory Lease Extension, the ground rent immediately reduces to a peppercorn (i.e. Nil).

2

Deferral of obtaining Freehold Vacant Possession

Compensation for the deferral of obtaining freehold vacant possession:- the freeholder will have to wait an additional 90 years before being able to take possession of the property.

3

Marriage Value

This is only payable when the lease term remaining is less than 80 years. Marriage Value reflects that the combined leasehold and freehold interests are worth more to the leaseholder following the lease extension, the “uplift” in value is split 50/50 between the freeholder and leaseholder.

Informal Lease Extension

You can make an approach directly to the freeholder and attempt to negotiate terms to extend the lease, whilst this approach is informal, you should always seek professional valuation advice and we have obtained successful outcomes for both freeholders and leaseholder using an informal approach. An informal lease extension can, sometimes, be quicker to conclude, but it depends whether the freeholder is willing to discuss on an informal basis.

Formal Lease Extension

First, is should be established that there is a statutory right to a formal lease extension, that is all the qualifying criteria set out in the Leasehold Reform, Housing and Urban Development Act 1993 are met (your solicitor will usually confirm eligibility). Following the leaseholder can serve a s.42 notice on the freeholder, requesting to extend their lease. Within the notice the premium offered by the leaseholder will need to be stated and in most cases, professional valuation advice will be required to determine the range of premium and the amount to state within the s.42 notice.

Brief overview of the process:

• Leaseholder serves a s.42 notice to extend their lease and states the premium offered, the freeholder is required to respond within around two months;

• Freeholder responds with a s.45 counter notice, either accepting or challenging the right to extended the lease. If accepted, the Freeholder will respond with the premium amount, which is usually higher than that offered by the leaseholder;

• The Freeholder can ask the leaseholder to pay a deposit, equivalent to 10% of the amount stated in the s.42 notice;

• The leaseholder and freeholder then have two months to negotiate the premium and terms, usually surveyors are instructed by both sides to carry out the premium negotiations, solicitors for each side will attempt to agree the terms, including modernising the lease where required;

• After two months and before six months from the date of the counter notice, the leaseholder can make an application to the First-tier Tribunal (Property Chamber) to determine the terms of the lease extension;

• In many cases agreement is reached prior to an application being made to the Ft-T and even if an application is made, it is often settled prior to a hearing date;

• Once terms are agreed, solicitors will finalise the lease extension and payment of the premium.

WHAT FEES ARE INCURRED?

Our fees to prepare a valuation report for lease extension purposes start at £325+VAT and we can usually offer a fixed fee for negotiations.

A leaseholder will usually incur the following fees in instructing valuation and legal advice:

Surveyor’s fee – to prepare the initial valuation advice and then to negotiate the premium

•
Legal fees – for serving notices, responding to counter notices, negotiating the terms and finalising the lease extension

•
If an application is made to the First-tier Tribunal, legal and valuation fees will increase to reflect the time spent preparing for and appear at the hearing, it may also be necessary to instruct a barrister.

•

Further, a leaseholder is also responsible for the reasonable fees incurred by the freeholder for their surveyor and solicitor. However, the leaseholder will not be responsible for the fees for negotiation or (if required) preparation for and appearance at Tribunal. A s.60 costs application can be made to challenge the freeholder’s proposed fees.

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VALUATION REPORT FAQ’s

The Valuation Report
The valuation report will set out the “best” and “worst” case outcomes and set out the premium range that should be expected. We use our expert knowledge of the legislation and case law to provide our valuation advice.
Whilst the legislation sets out the valuation procedure, the inputs used in the process can be subject to varying views between leaseholders and freeholders and this creates the range of possible premiums. Our report will fully set out this range and the reasons why, including what we consider to be a reasonable premium having regard to all relevant factors.
The report will provide the amount to be stated in the s.42 notice (for leaseholders) or s.45 counter notice (for freeholders).
I am a freeholder and I’ve been served with a s.42 notice
It’s really important to immediately seek expert legal advice, s.42 notices have prescribed time constraints and we’ll be pleased to put you in touch with an expert solicitor. Following we can prepare valuation advice and negotiate with the leaseholder’s surveyor. In the rare instance agreement can’t be reached, we’ll prepare valuation advice as an Expert Witness for the purpose of the First-tier Tribunal.
The leaseholder is liable for your reasonable legal and valuation fees, however not fees incurred in negotiations or preparing for and appearing at a Tribunal hearing.

What role does the surveyor have?
Your surveyor is responsible for providing valuation advice, both at the outset and then (if instructed) to negotiate the premium with the other side. If the matter proceeds to Tribunal, your surveyor will prepare Expert Witness evidence for the Tribunal and, if the disagreement is on valuation issues only, we may be able to represent you at Tribunal as a “surveyor advocate”, however in some circumstances a solicitor and also barrister may be required. We will work closely with your solicitor throughout the process.
What role does the solicitor have?
Your solicitor will oversee the process. They will verify eligibility, serve notices, negotiate lease terms and, if required, make an application to the Tribunal. If required, they will also arrange for representation at a Tribunal Heating and the services of a barrister if required. They will finalise the lease extension and arrange for payment of premium to the freeholder and ensure the lease extension is completed and recorded with Land Registry. They will also arrange for payment of SDLT if applicable.

For advice & guidance, call 0330 174 0644.

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