Landlord leasehold about to expire - what happens to tenant?

AlphaCentauri

Hi, I'm a long term tenant in a leasehold flat paying rent to a landlord who owns the lease title.  The leasehold expires in a few years and the landlord is considering his options:

1) return title to freeholder but they are not interested in managing it because there is no profit in it for such a short duration.  (I think they also know I will legally challenge them if they try to evict me or raise the rent excessively).

2) sale on open market - unlikely to receive a reasonable sum given short length on remaining lease.

3) Hand title over to me for the remainder of the lease.

The landlord wants option 3.  

He has been advised by his solicitor on this course of action.

The landlord inherited the title from a now deceased relative and it's managed as a part of the deceased's estate. It appears the motivation here is to mitigate potential liabilities for the Executors.

Needless to say, I'm worried there may be a catch somewhere.  

There is also the obvious question of what would happen when the lease expires?  Presumably title would default to freeholder who would then just relist on the open market with a 100 year lease?  Would I as a long term tenant have any rights here?

Look forward to hearing from you.  Regards.

user1977

The most obvious catch of stepping into the leaseholder’s shoes is that you take on all their liabilities under the lease for repairs etc.

AlphaCentauri

From the landlord's POV, perhaps this is the most commonsensical option because the others just mean more taxes and legal fees, and more paperwork for his estate.

silvercar

Even short leases have a value, they usually end up being sold at auction.

Your landlord could either sell as a property with tenant or evict you first and then sell. Incidentally, the new law coming into force next year still allows for eviction if the landlord is selling.

if they return the property to the freeholder, then the freeholder either keeps you as a tenant or goes down the eviction route, presumably more likely to evict you if they don’t want to be a landlord.

The inheritance complicated things somewhat. If the estate of the deceased is sorted then the property can’t still be part of the estate - it must be owned by somebody or a trust. So the position of the landlord should be made clear - are they owner or is it now owned by a trust? The complication is that the person you call the landlord should be acting in the interests of the estate (assuming the estate isn’t finalised) or a trust (if one has been set up). They can’t just decide to give away an asset of the estate or of a trust.

mlz1413

So are you paying significantly under market rent? IE paid the same rent for years and you and deceased LL where happy with arrangement.

If so, the flat is probably in its original condition and so any new LL would need to do significant work to get electrics up to date and an EPC would get the worst rating.

Therefore the flat is not an attractive part of the deceased estate.

A fair few things to consider:
Is the flat part of a block that is mainly run down?  This might mean the Leasehold is expecting most of the flats in the block to return to them and they can do what they want with the while block.

Is your flat is the only flat that has a nearly expired lease? then the Leasehold is probably not interested in owning 1 run down flat in the block, as they would be forced to be responsible for it.

On the other side the beneficiaries of the deceased estate are currently responsible for the flat and you.

But is this flat one of many owned by deceased?
Is it the worst in a large portfolio? 
Is it the best?
Or is it insignificant in the estate and actually a drain of funds.  To the point where it is easier to give away and be rid of it.

You probably don't have the right to know the answers but just writing them out makes me think that is you are offered the flat you need to think very hard about being able to afford it.

Even if the flat was sold for £1, do you have any resources to extend the lease?  
The other thought is:
Do you have the ability to pay a current market rent.

If you have the money to buy the flat and extend the lease this would give you security to know where you are living for the rest of your life.

But you will also need to start paying the service charges and for the inevitable block repairs. So ensure you know you can afford it.

All the best. Would love to know the ending. 

theartfullodger

Landlord is deceaseds estate not individual person you've been dealing with .

So  rent should be paid to estate (e.g. cheque in name of estate not individual).  Do that next month.

Do you have copy of your original tenancy?

eddddy

AlphaCentauri said:

The leasehold expires in a few years...

How many years?

The leaseholder has a Statutory right to extend the lease by 90 years.

If the leaseholder (i.e. your landlord) doesn't have the money or inclination to extend the lease, they would normally sell it (cheaply) to somebody else who does have the money to extend the lease.

There's almost always the potential to make a profit from doing that - i.e. buy the flat very cheap, pay to extend the lease, and end up with a flat with a 90+ year lease.

AlphaCentauri said:

3) Hand title over to me for the remainder of the lease.

The landlord wants option 3.  

He has been advised by his solicitor on this course of action.

In that case, maybe investigate whether you can make some money by accepting the flat, and then selling it to somebody who wants to extend the lease.

But you'd probably need to take advice from lease extension experts (valuers) etc, before banking on that.  It's unlikely, but it's possible that it's not economic to do that.

AlphaCentauri

silvercar said:

Even short leases have a value, they usually end up being sold at auction.

Your landlord could either sell as a property with tenant or evict you first and then sell. Incidentally, the new law coming into force next year still allows for eviction if the landlord is selling.

if they return the property to the freeholder, then the freeholder either keeps you as a tenant or goes down the eviction route, presumably more likely to evict you if they don’t want to be a landlord.

The inheritance complicated things somewhat. If the estate of the deceased is sorted then the property can’t still be part of the estate - it must be owned by somebody or a trust. So the position of the landlord should be made clear - are they owner or is it now owned by a trust? The complication is that the person you call the landlord should be acting in the interests of the estate (assuming the estate isn’t finalised) or a trust (if one has been set up). They can’t just decide to give away an asset of the estate or of a trust.

I explained the different options in my OP.

I'm still paying rent to the original deceased landlord (estate of..).  I believe they've set it up as a trust.  I'm not certain though as I've heard various things over the years.

AlphaCentauri

mlz1413 said:

So are you paying significantly under market rent? IE paid the same rent for years and you and deceased LL where happy with arrangement.

If so, the flat is probably in its original condition and so any new LL would need to do significant work to get electrics up to date and an EPC would get the worst rating.

Therefore the flat is not an attractive part of the deceased estate.

A fair few things to consider:
Is the flat part of a block that is mainly run down?  This might mean the Leasehold is expecting most of the flats in the block to return to them and they can do what they want with the while block.

Is your flat is the only flat that has a nearly expired lease? then the Leasehold is probably not interested in owning 1 run down flat in the block, as they would be forced to be responsible for it.

On the other side the beneficiaries of the deceased estate are currently responsible for the flat and you.

But is this flat one of many owned by deceased?
Is it the worst in a large portfolio? 
Is it the best?
Or is it insignificant in the estate and actually a drain of funds.  To the point where it is easier to give away and be rid of it.

You probably don't have the right to know the answers but just writing them out makes me think that is you are offered the flat you need to think very hard about being able to afford it.

Even if the flat was sold for £1, do you have any resources to extend the lease?  
The other thought is:
Do you have the ability to pay a current market rent.

If you have the money to buy the flat and extend the lease this would give you security to know where you are living for the rest of your life.

But you will also need to start paying the service charges and for the inevitable block repairs. So ensure you know you can afford it.

All the best. Would love to know the ending. 

There's one other flat in the same situation.

Yes, I believe the estate of the original landlord owns several properties on behalf of an extended family.  

Yes, these 2 flats are likely the worst condition in their portfolio.

I suppose I could look at extending the lease somehow.  

Current market rent is well above what both flats are currently paying.  Basically, the reason for that is the landlord refused to do property upgrades over time and so never raised the rent.

Service charges and block repairs are practically non-existent for this building although I'd obviously need confirmation of this from the freeholder ie. if title were handed to me, the freeholder wouldn't suddenly introduce a new service charge.

AlphaCentauri

theartfullodger said:

Landlord is deceaseds estate not individual person you've been dealing with .

So  rent should be paid to estate (e.g. cheque in name of estate not individual).  Do that next month.

Do you have copy of your original tenancy?

I'm still paying to the bank account of the deceased original owner named on my contract...now listed on paperwork as 'estate of...'

AlphaCentauri

eddddy said:

AlphaCentauri said:

The leasehold expires in a few years...

How many years?

The leaseholder has a Statutory right to extend the lease by 90 years.

If the leaseholder (i.e. your landlord) doesn't have the money or inclination to extend the lease, they would normally sell it (cheaply) to somebody else who does have the money to extend the lease.

There's almost always the potential to make a profit from doing that - i.e. buy the flat very cheap, pay to extend the lease, and end up with a flat with a 90+ year lease.

AlphaCentauri said:

3) Hand title over to me for the remainder of the lease.

The landlord wants option 3.  

He has been advised by his solicitor on this course of action.

In that case, maybe investigate whether you can make some money by accepting the flat, and then selling it to somebody who wants to extend the lease.

But you'd probably need to take advice from lease extension experts (valuers) etc, before banking on that.  It's unlikely, but it's possible that it's not economic to do that.

Very helpful.  Thanks.  Yes, I need someone experienced in this area.