Lease extension clauses?

by Readers Question

13:55 PM, 14th September 2016
About 2 years ago

Lease extension clauses?

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Lease extension clauses?

I am about to sign a new lease extension that has been agreed by my solicitor. However there is a final clause that I am worried about, and which my solicitor has stated in his report that I should not be concerned about as it is so far off and will not affect a lender or buyer.clause

The lease extension is under the Leasehold Reform Act 1993 S56 for additional 90 years at peppercorn rent.   Clause added by freeholders solicitor is :

5.1 the landlord may at any time during period

5.1.1 12 months ended 31.3.2096

5.1.2. 5 years ending 31.3.2186

Apply to the Court under S61 of the Act for an order of possession on the grounds that it intends to demolish or carry out substantial works on the whole or part of the property.  Provision of that Section and of Schedule 14 of the Act to pay compensation to the tenant.

I know this is a long way off, but surely it a will make the property unsaleable at those times and even affect a sale now.  Anyone come across this  clause added to a lease extension?   The landlords S45 notice had the clause regarding  redevelopment under S47(1) deleted.

I’d  be grateful for any advice before I sign.

Nina



Comments

Puzzler

18:46 PM, 14th September 2016
About 2 years ago

The Act says:

"•the landlord’s redevelopment right – the new lease must also contain a clause giving the landlord the right to repossession of the flat for the purposes of redevelopment. This right does not arise until the end of the term of the existing lease and is subject to a court application and the payment of full compensation to the leaseholder for the full value of the remaining 90 years. This will not cause any difficulties in mortgaging the flat."

Looks like your lease is just being a bit more specific in that if the first option is not taken they have a further option at the end of the extended lease. There is nothing to stop you or the then owner re-extending prior to that in which case it's not relevant.

You could insist on the part about full compensation and a court order if you are worried

IMHO the law will change long before then

Ms Leaseholder

11:53 AM, 17th September 2016
About 2 years ago

Hi Puzzler, out of interest, why do you think the law will be changing?

Nick Pope

8:53 AM, 18th September 2016
About 2 years ago

As a valuer this would make no difference whatever to value as it's so far in the future. I don't think that a lender would have any problems either.
Finally there would be full compensation payable. Over the 45 years that I have been in the business prices in my area (south east) have risen approx. 45 times. That suggests that a £200,000 flat will be worth £16,000,000 in 2096 and £34,000,000 in 2186 - can't wait!

Puzzler

19:00 PM, 18th September 2016
About 2 years ago

Reply to the comment left by "Leasehold Owner" at "17/09/2016 - 11:53":

Ha ha just a personal opinion


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