First time leasehold extension advice

by Readers Question

10:13 AM, 7th July 2017
About A year ago

First time leasehold extension advice

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First time leasehold extension advice

My wife and I own both flats (leasehold) in a Victorian conversion. We also own the freehold. There are no other flats.

I am looking to extend the leaseholds on the flats as they are about 75 years remaining.

What should we consider when deciding on the length of the extensions? We have not done this before, so and advice observations would be welcome

Regards
Brian



Comments

Neil Patterson

10:36 AM, 7th July 2017
About A year ago

Hi Brian,

I am not an expert in this area but I looked up the Leasehold Extension Calculator on the Leasehold Advisory service website >> http://www.lease-advice.org/calculator/

But it said "Please note that this calculator cannot do calculations for leases with less than 50 years remaining (40 years for flats in Central London)." You may be a touch early.

Also under how long can I extend the lease for it says "The right under the Leasehold Reform, Housing and Urban Development Act 1993 is to add 90 years to what is left on your existing lease. For example, if you have 75 years left on your lease you will be given a new lease of 165 years. Alternatively you may be able to extend your lease to any number of years by negotiating with your landlord."

brian O'Donoghue

12:28 PM, 7th July 2017
About A year ago

Hi Neil, thanks for this.As we also own the freehold then there should be no problem re a long lease. My question is should I go for 1000 years for example?
Thanks
Brian

Graham Bowcock

12:52 PM, 7th July 2017
About A year ago

Dear Brian

Hope this isn't a daft question, but if you own the freehold why do you want to do anything with the leaseholds? Usually the leases would be extinguished on purchase of the freehold. Presumably you could sell the whole building freehold (as an investment) or if you wish to sell the flats separately you could simply sell a new long lease on terms which you set out. You could offer one lease and one freehold or two leases with a shared freehold, the choice is yours.

Forgive me if I've missed something.

Graham

Puzzler

15:02 PM, 9th July 2017
About A year ago

The leases are not extinguished when you own both freehold and leasehold and extended leases will mean it's easier to raise money on them or sell. You need a specialist solicitor but bear in mind you cannot grant a lease extension to yourself so you won't be able to extend without altering the ownership in some way of either the flats or the freehold.

brian O'Donoghue

16:18 PM, 9th July 2017
About A year ago

Reply to the comment left by "Puzzler " at "09/07/2017 - 15:02":

Hi Puzzler
Thanks for your reply. If we can't grant a leasehold to ourselves, could we change the ownership of the freehold to just one of us and then grant the leaseholds to the other?
many thanks
Brian

Jay James

22:16 PM, 9th July 2017
About A year ago

How about forming a limited company as the second required entity?

Puzzler

8:35 AM, 10th July 2017
About A year ago

A limited company is a bit OTT for 2 flats unless you want to sell only one of them - there are legal and tax hoops to jump through. I would suggest putting one flat in each name and the freehold in joint names. I'm assuming you don't have a mortgage on this property? Unless you want to sell or raise funds there's no need to do anything now...

brian O'Donoghue

9:16 AM, 10th July 2017
About A year ago

Many thanks for the replies, very helpful. We do have mortgages on both, one at 25% value of property 1 and the other about 50% of value on property 2. We bought the flats at different times.
I will be contacting our solicitor this week but wanted to get a feel for the issues before doing so. She indicated in the past that we should bot have any issues but now I'm not so sure!
thanks
Brian

@ Section42

9:46 AM, 10th July 2017
About A year ago

Just a couple of thoughts on this. Firstly the lease term - suggest that you make this 999 years with a peppercorn ground rent - thereby transferring all of the value back from the Freehold to the leasehold interests. Secondly, you may need to consider the capital tax position - a disposal out of the freehold can be seen as conferring a benefit - this may be circular if the freeholder and leaseholders are the same people but we have seen situations where this has been left a long time and the FH is in the name of a company. When this happens the company (and the individual) can end up with an unexpected capital tax liability.

Puzzler

11:11 AM, 10th July 2017
About A year ago

If you have mortgages then the lender will need to be involved for their securitisation. Hence why the leases cannot be cancelled, I take it you wish to raise more funds? in that case do it all at once, it'll be cheaper. There is no tax unless there is a premium (which there won't be in your case). Make sure your solicitor has experience of this, you do need a specialist. It is your only opportunity to make any other changes required.

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