Lease Extentions and Collective Freehold Purchase
Get together with other residents and assess the level of concern or awareness.
Plan with other residents
- It will usually be more cost-efficient for leaseholders to acquire the freehold to the building, if they are able to, than extend the lease, as they can extend to 999 years and reduce the ground rent to a peppercorn at the end of the process. If the landlord and agent is also providing poor service and is being unreasonable then this is a good way to take control.
- Get advice from a legal professional who has plenty of experience in this field. This is a niche area of law and strict rules on deadlines and interpretation apply. ALEP, the Association of Leasehold Enfranchisement Practitioners, is a good starting point (alep.org.uk). The Leasehold Advisory Service (lease-advice.org) also has large amounts of information on the processes involved.
- Speak to a specialist surveyor with experience of the valuation principles under the legislation to get an idea of the cost of the extended lease. An estate agent's valuation will not suffice. As a leaseholder you will also be responsible for a proportion of the costs the freeholder incurs. Most will try to recover all or an "unreasonable" level of costs. You can apply to a Leasehold Valuation Tribunal (LVT) for a determination on what can be regarded as reasonable.
- Get help to manage the process. Whether you are buying the freehold or a group of tenants are extending the lease to their flats it helps to have someone who can manage the process and has the time, understanding and interest to drive it forward. Are there leaseholders in the block prepared to lead the project? There are project management companies that will help, for a fee, to manage the process, such as leaseholdsolutions.com
Then call a meeting to see if there are enough leaseholders (not short-term tenants: it must be the owner of the flat) who are willing to take the steps to drive out the freeholder. If there is insufficient interest for the freehold, consider making joint applications with a number of other leaseholders in the block to extend the leases to your flats.Strength in numbers helps to save costs and gives more negotiating clout to influence the premium. There is usually a clear benefit to the lessee in terms of reduced legal and valuation costs, both their own and the freeholders' costs (for which they are also responsible).
The legal steps
- Whether extending your lease or acquiring the freehold to your building, the process is generally begun by service of a statutory notice on your freeholder. The notice will usually set out (among other things) the minimum you are willing to pay for either the lease extension or the freehold acquisition. It will also set a date by which the other party must respond to you by way of counter notice.
- Once you have received the counter-notice, the usual issue for dispute is the amount payable for the lease extension. You want to pay as little as possible, while the freeholder will want to extract the maximum. At this point you will need the surveyor who performed the valuation to negotiate on your behalf with the freeholders. If it is not possible for the surveyors to agree on a compromise, then an application to the LVT for a "determination" will be necessary. The LVT will look at the valuations of both parties, the lease(s) and, if necessary, hear each party's arguments and make a determination.
- You stand a better chance of having a determination found in your favour if you have proper representation, as the principles involved are complicated and any mistake could be expensive.
- Depending on how the application proceeds, you may need to go to the county court. This can be expensive but, depending on the reasons for going, you may be able to recover the costs from the "other party".
- Some freehold companies own large portfolios and are not always unreasonable in their demands. You may be able to negotiate directly with them without the need to serve.