Q. Am I legally entitled to extend the lease of my flat - and if so, at what point would it be most beneficial to do so?
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A. Under the Leasehold Reform, Housing and Urban Development Act 1993 (as subsequently amended), you are entitled to a 90-year extension on your lease – as long as you have already held it for more than 2 years. However, this comes at a price, since the legislation entitles the freeholder to a degree of monetary compensation for having to wait an extra 90 years before getting their property back.
When is the best time to apply? Basically, the sooner the better. The really critical moment is when the unexpired term falls to 80 years. At this point, as well as the afore-mentioned compensation, you also become liable to pay so-called “Marriage Value” – i.e. 50% of the increase in the flat’s market value due to the lease extension.
Needless to say, this is a highly complex and time-sensitive process, with all sorts of pitfalls along the way. For instance, formal notice must first be served under Section 42 of the Act. Get any part of this wrong, and the whole application could be thrown out – and you could find yourself paying the freeholder’s abortive costs. You would also then have to wait at least another year before being able to reapply, and a year’s delay could mean a significant increase in both compensation and Marriage Value.
So, the essential first step is to seek proper professional advice – and not from just any solicitor or surveyor, but from one that belongs to the Association of Leasehold Enfranchisement Practitioners (ALEP). They are the real specialists in this area, and will therefore be fully up to speed on all the most recent legal precedents.
Finally, is it all worthwhile? In a word, yes - particularly if you are going to be selling at some point in the future, since you will benefit from the resulting increase in your flat’s market value. If you are selling sooner rather than later, i.e. after formal notice has been served, but before the extension you are seeking has actually been granted, then you can even assign that notice to your purchaser - so you don’t have to sell at the shorter lease value.