Lease Advice for Freeholder

SWicks

We own the Freehold on our property which is a detached house split into 2 flats.  We have a lease on our flat and the the owner has a lease on theirs and they pay a peppercorn rent to us once a year.  We are in the process of moving (we are going to rent out our flat and purchase a new property) and we have been told that we need to extend the lease for our own flat.  The lease is currently 99 years from 1977, so 56 years left.
I presume we will need to get a solicitor involved to extend our lease but does anyone have any experience of this particular situation and idea of cost?

greatcrested

Told by who?

If you are the sole freeholder, you can extend the lease whenever you want.

Ring a couple of local solicitors for quotes.

princeofpounds

Yes you should extend your lease, because any buyer will find it hard to get a mortgage with a short (under ~80yr) lease.

As you own the freehold outright, you basically have to pay yourself. Unless you have multiple personalities (in a legal sense you do!), agreement should not be hard to reach! The sum involved can therefore be zero.

But you will need a solicitor to do the paperwork. It's straightforward so shouldn't be too expensive. Depends where you live but I'd guess three figures rather than four perhaps? In theory you could do it yourself but in practice far easier and less risky to get the solicitor to do it.

At the same time, you should check out the situation with the other lease. You may be able to offer them a lease extension too and receive some money for it. The value would depend on a few things. Perhaps they want it, perhaps they don't. But it's unlikely a potential buyer would specifically value the opportunity to do this. Plus doing two at once will make the legals cheaper than individually.  

SWicks

Thanks for the advice so far, I will speak to a solicitor asap.  The lease for our neighbour upstairs has 84 years left, so I suppose he will need update fairly soon?  I'm pretty sure he has just renewed his mortgage.
Forgive what seem like stupid questions but does he pay me to renew his lease?  If so, how much do I need to charge him?

princeofpounds

Your neighbour should consider an extension carefully, but you can't assume he will go for one right away because he may not have the money and he has a few years left before it becomes really awkward.

Yes, he has to pay the freeholder to extend. Go to lease-advice.org to learn more about the process. At first it is a plain negotiation, but if the leaseholder doesn't like the freeholder's offer then they can undergo an official process called the leasehold valuation tribunal to pursue what is called a statutory extension. That's basically an extension they have a right to in law, with a formula defining the price. 
In practice, the leaseholders will usually pay a little premium to the formulaic value of the extension to avoid all that hassle. But it depends. In your case, you probably want to offer a bit of a discount to incentivise it happening sooner rather than later, after you have departed.

Now, the formula is mechanical, and related to the perceived uplift in the value of the extended leasehold along with some other adjustments, but the inputs are subjective (this is what the LVT basically provides an independent decision on). Google 'lease extension calculator' to get a sense of the inputs and a ballpark valuation.

eddddy

To extend your own lease - you need a solicitor to prepare a 'deed of variation' for your lease. Maybe you'll want to extend the lease to 999 years.

If you have a mortgage, your lender will probably need  'deed of substituted security' as well.

So they'll be some solicitors fees for preparing those.

poshpalace

I was in a similar position a few years back.

You will not be able to extend your lease if your lease and the freehold are held in the same name.

When a freeholder grants a lease/lease extension he enters into a contract with the leaseholder. And it is not legally possible to enter into a contract with yourself.

I wouldn't worry about it for now. If you decide to sell the flat in the future you can grant the new leaseholder a lease extension.