Help! I want to sell my flat, but I am advised that it will be difficult, because it "only" has 70 years left on the lease! Obviously, I need to extend it, but the freeholder is asking a ridiculous amount.
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A. The reality is that it becomes increasingly difficult to sell leasehold properties, once the period remaining drops to 70 years or less. Why? Firstly, because they are obviously going to be less attractive to investors, and secondly, because mortgage companies aren’t overly keen on them either - so any prospective buyer will be advised to seek a lease extension if the term is approaching the 70 year mark.
That said…under the Leasehold Reform, Housing and Urban Development Act 1993, you do have the statutory right to have your lease extended by up to 90 years - as long as you have already held it for a minimum of 2 years. The freeholder cannot deny you this right. However, they are entitled to make a “reasonable” charge for the extension – basically as compensation for having to wait an extra 90 years to get their property back. Under the Act, that charge is determined by tribunal.
When applying for an extension, it’s best to do it sooner rather than later, since the longer you leave it, the more expensive it gets. The really critical moment is when the unexpired term falls below 80 years, at which point (in addition to the compensation already mentioned) you also become liable to pay so-called “Marriage Value” – i.e. 50% of the notional increase in the flat’s market value that results from the extension itself.
Sometimes, it may be possible to arrive at an informal agreement with the freeholder. In your case, however, it sounds as though you probably have no choice other than recourse to the Act. Not surprisingly, this is a complex process - so the essential first step is to seek proper professional advice from a solicitor or surveyor that belongs to the Association of Leasehold Enfranchisement Practitioners (ALEP). They are the real experts. Nevertheless, ultimately, you will have to reconcile yourself to paying a not insignificant amount of money for your lease extension. I’m afraid that’s just the way it is.