What can freeholder do if leaseholder dies intestate?

by Readers Question

8:23 AM, 3rd July 2020
About a month ago

What can freeholder do if leaseholder dies intestate?

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What can freeholder do if leaseholder dies intestate?

I own Freehold of a block of flats in London. One of the lessee has 53 years of unexpired lease remaining. He/She does not want to extend it for various reasons. He/She is in mid 50s. He/She has no one to assign the property to in the Will as he/she has No dependants.

What happens if he does not survive the remaining 53 years of the lease before it becomes my property or property of my Estate. I am 76 years old.

Question 1: If the leaseholder dies before the remaining years expire would the property get transferred to me automatically without paying any consideration to his Estate.
Question 2: If the property does not pass to me automatically would it go to the Crown and can the Crown sell it to me or give it to me as a Freeholder.
Question 3: Is it possible that if Crown takes over will it negotiate a premium to extend the lease to 99 years.
The premium in current situation could be as much as £100k

Can someone give advice.
Thank you in advance.

GLB



Comments

Alan Bromley

10:10 AM, 3rd July 2020
About a month ago

You seem a bit confused as to your rights as Freeholder. The flat could be sold by whoever inherits it, whether that is a beneficiary in a will (who could also choose to live in it) or the Crown if the person dies intestate. It could be sold with the current lease or if there is a named beneficiary that person might want to extend the lease but as there are less than 80 years left that may not be worth the hassle due to the marriage value. If the Crown gets it they would probably sell it at auction and the buyer would negotiate the extension of the lease.

An executor (or the Crown) would be required to obtain the market value for the flat but you could buy it in which case you could extend the lease yourself and sell it on at a higher price. However, I'm not sure how the taxman would tax this increase in value so you'd need to take advice.

You won't be GIVEN the flat if there's any of the lease remaining which, since you are 76 and the lease is 53, would require a degree of immortality!

GLB

10:43 AM, 3rd July 2020
About a month ago

Hi Alan
Thank you for your very clear and useful advice.
GLB

BernieW

15:03 PM, 3rd July 2020
About a month ago

If you want to liquidate the potential 'lease extension premium' which your leaseholder does not wish to pay - you could sell a head lease, between the freehold and the current occupational lease. Your new leaseholder would pay you the £100k (or whatever) and he/she would then deal with the leasehold issues below.

Alternatively, sell the freehold of the whole building and cash in your chips on the whole thing.

Happy to discuss. Bernie Wales

Puzzler

7:48 AM, 4th July 2020
About a month ago

Reply to the comment left by BernieW at 03/07/2020 - 15:03
Interesting, how can you introduce a head lease between two parties without both of their agreement. This would be a variation and would also affect all the other leaseholders?

Just because the leaseholder has no dependants does not mean they have no-one to assign it to, they can make a will in favour of anyone. If intestate it can go to the next of kin as far as third cousins; in Scotland no limit to distance of relationship. If there really is no-one then the crown will sell it.

If you are looking to capitalise then I would consider selling the freehold. How much it would fetch depends on the ground rent amongst other things. You can't compel a lease extension. You would need specialist advice.


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