Modernisation of Lease extensions

by Readers Question

9:23 AM, 2nd February 2015
About 4 years ago

Modernisation of Lease extensions

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Modernisation of Lease extensions

I have a 75 year lease on a flat which is being run as a buy to let. I have entered into negotiations with the landlord to try and achieve a lease extension. Modernisation of Lease extensions

The landlord has a supplied a completly new draft lease for consideration. My old lease lease does not require me to get the freeholders consent to sublet which was one of the attractions to me when I purchased the property. The new lease has a clause which requires me now to gain permission (at a fee) from the freeholder for each sublet.

My understanding is that if I opted to extend the lease under the act (leasehold reform act) then all the freeholder would be able to do is to extend the lease and introduce some modernisations such as bringing outdated fees up to date.

I think removing my right to not have to gain permission for each let is more than a modernisation… it is a fundamental change to the lease.

My question therefore is; does anyone have experience of this and if I did cut my losses now and proceed with the act could I be 99% sure of preserving the existing terms in the lease which do not require me to seek permission for each letting?

Thanks in anticipation.

Chris Unwin



Comments

Mark Alexander

9:26 AM, 2nd February 2015
About 4 years ago

Hi Chris

I have invited Roger Hardwick from Brethertons Solicitors to comment as he is a member here and specialises in this type of work - please see his member profile >>> http://www.property118.com/member/?id=449
.

Mike W

11:52 AM, 2nd February 2015
About 4 years ago

Suggest contacting the lease advisory service - free government run.

http://www.lease-advice.org/

Gary Nock

22:23 PM, 2nd February 2015
About 4 years ago

Chris,

Unless I am missing something here are you asking for a voluntary lease extension from the Freeholder, or a lease extension under the Act? An extension under the Act adds 90 years to the existing term and at a "peppercorn"rent. If its a voluntary then you normally only get it increased up to the previous term and the Freeholder adds all tbe additional clauses in. Which includes the fees for subletting and greatly increased ground rent fees.

Chris Unwin

22:50 PM, 2nd February 2015
About 4 years ago

Reply to the comment left by "Gary Nock" at "02/02/2015 - 22:23":

Thanks Gary. yes I am initially trying to negotiate on a voluntary basis but it looks as if I will have to use the act to avoid the inclusion of some adverse terms by the the freeholder. Crucially, what I am trying to get a feel for is whether or not the introduction of charging for subletting is a modernisation or simply an introduction of a new clause to the Freeholders advantage.

Chris

Gary Nock

0:08 AM, 3rd February 2015
About 4 years ago

Chris it's a new charge to the Freeholders advantage. Normally a statutory extension under the Act is just that -an extension of the existing lease by 90 years with no power by the freeholder to subject the leaseholder to less favourable terms. Under a voluntary they can put whatever they want in. It looks a cheaper option particularly when you take into account tbe valuation of the lease and appeal to First Tier Tribunal when there is no agreement. However it comes at a price with all the extras loaded in, a shorter lease term, and ground rent increase.

Chris Unwin

9:13 AM, 3rd February 2015
About 4 years ago

Reply to the comment left by "Gary Nock" at "03/02/2015 - 00:08":

Thanks Gary, So, if I go down the statutory route will the freeholder be able to impose the introduction of the new charge for subletting? Are there anty precedents in this case? Thanks. Chris

Gary Nock

13:34 PM, 3rd February 2015
About 4 years ago

Not as far as I am aware. As stated the new lease has to be on the same terms as the old one. If there's nothing in there about sub-letting fees then it shouldnt be in the new one. Section 57 of the Act does state that modifications can be made but these are to take account of changes in the demised premises or the aggregation of leases from when the lease was originally agreed. This link on the legislation website tells you a bit more about it. http://www.legislation.gov.uk/ukpga/1993/28/section/57. Plus the lease.org website has a section on it.

Puzzler

15:15 PM, 7th February 2015
About 4 years ago

You can negotiate the terms of the voluntary extension. Tell the freeholder you do not agree to this clause so if he insists on it you will go the statutory route. Freeholders usually use this opportunity to increase the ground rent as well so you have a bargaining tool as under the statutory extension ground rent goes to "peppercorn" i.e.nil. It is usual to agree to a ground rent increase as old leases are way out of date and this is offset by speed, as I am told the statutory route can be very slow. Other terms are by way of agreement.


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