Lease Extensions & Enfranchisement

Lease Extensions

What is a Lease Extension?

Under the Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002), long leaseholders (tenants) have the right to extend their lease. The law gives qualifying Tenants the right to extend their lease by 90 years, in addition to the unexpired term they already enjoy, at a ‘peppercorn’ rent; this means there is no ground rent to pay.

Under the Act, the Landlord is entitled to receive a premium which is made up of potentially three elements; the reduction in the value of the Landlord’s interest, in qualifying cases a share of the marriage value and any reduction in value of an interest the Landlord has in another property or any other loss which comes as a result of such an interest.

Do I Qualify to Extend My Lease?

To be a qualifying leaseholder, you must have owned your property/long lease for 2 years and the original lease term must have exceeded 21 years when it was originally granted.

Are any Freeholders Exempt?

Yes, certain freeholders/buildings are exempt from the legislation, those being National Trust and Crown properties, although the Crown have a separate agreement with the House of Commons to comply with the principles of the legislation, buildings within a cathedral precinct and if the freehold includes any track of an operational railway.

What is the Process for Extending a Lease?

The first step is to instruct a suitably qualified and competent valuer to carry out an inspection and valuation of the property in accordance with the Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002).

As well as providing general advice, we will provide a ‘best and worse’ case lease extension valuation, as a guide to the possible outcome of negotiations. We will also negotiate the premium payable and other terms of the lease, and where required, represent at tribunal. 

Collective Enfranchisement

What is Collective Enfranchisement?

This technical term refers to buying a share of a freehold. The process is subject to qualifying criteria and when met, should result in leaseholders purchasing the freehold of the building. 

Do I Qualify for Collective Enfranchisement?

For the building to qualify:

• Less than 25% of the total internal floor area, excluding any common parts, is of non-residential use.
• There must be a vertical division. This means no part of the building should extend over or under another building. If this is the case, both buildings may be able to join together to collectively enfranchise as one.

For leaseholders to qualify:

• At least two thirds of the flats in the building must be held on qualifying leases. This is a lease that was originally granted for a minimum of 21 years
• 50% Of the leaseholds in the building must participate. If there are only 2 in the building, both must participate.
• A leaseholder must not own more than 2 leasehold interests in the building. This is jointly with others or solely in their name. Where this applies, these interests will be discounted from the two thirds.

What is the Process for Collective Enfranchisement?

The first step is to instruct a suitably qualified and competent valuer to carry out an inspection and valuation of the property in accordance with the Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002).

As well as providing general advice, we will provide a ‘best and worse’ case valuation, as a guide to the possible outcome of negotiations. We will also negotiate on your behalf, and where required, represent at tribunal. 

Enfranchisement of Houses

What is Enfranchisement?

The Leasehold Reform Act 1967 gives leasehold tenants of houses the right to acquire the freehold interest. The right to buy the freehold, and any intermediate leasehold interest, without the landlord’s agreement is called enfranchisement. The 1967 Act has been amended and extended over the years, which has made the rules for calculating the price leaseholders pay complicated. The Commonhold and Leasehold Reform Act 2002 set about simplifying the rules and gave leaseholders extra rights. 

Do I Qualify for Enfranchisement?

The right to enfranchisement depends on the property, lease and meeting certain criteria:

For the building to qualify:

• The building must be reasonably considered a house; there must be a vertical division.
• The building may still qualify if it contains an element of commercial use, or if it was a house but has been converted into flats.

For the lease to qualify:

• The original term must have been granted for a minimum of 21 years, or with a right to renew

For the leaseholder to qualify:

• To be a qualifying leaseholder, you must have owned your property/long lease for a minimum of 2 years.

What is the Process for Enfranchisement?

The first step is to instruct a solicitor to advise on the correct valuation basis; this will be either Section 9(1), 9(1A) or 9(1C). Once the valuation basis has been established, instruct a suitably qualified and competent valuer to carry out an inspection and valuation of the property in accordance with the Leasehold Reform Act 1967. As well as providing general advice, we will provide a ‘best and worse’ case valuation, as a guide to the possible outcome of negotiations. We will also negotiate on your behalf, and where required, represent at tribunal.