Leasehold property specialist Niki Adkins explains why leaseholders who also own their freehold still need to extend their lease, providing a ‘how to’ guide.
Do I need to extend my lease if I own a share of the freehold?
Even if you co-own your freehold (also known as ‘share of the freehold’) your flat lease will still exist; you will still own a leasehold flat, but with the added benefit of a share in the freehold.
Mortgage lenders and future buyers will still want the lease to be extended, regardless of the fact that the flat benefits from part-ownership of the freehold.
Why do I need to extend my lease if I own a share of the freehold?
The main reason for this is because your lease is the ‘contract’ which governs what goes on in the building and, for example, what proportion each flat contributes towards the building’s maintenance and insurance etc.
If the lease did not exist, none of this would be regulated and lenders would not be happy to lend against the flat.
Also, the reality is that, if the lease ran all the way down to zero days, you would have to move out and hand the flat back to the ‘freeholder’. As such, a lease extension would be required to ensure that the lease never gets that short.
How to extend your lease if you own a share of the freehold
Do I have to pay a premium if I own a share of the freehold?
As you would effectively be granting a lease extension to yourself (as freeholder, to leaseholder), there would usually be no premium (‘price’) payable for the extension, other than the legal costs and Land Registry expenses involved.
Do freehold-owners have to agree to your lease extension?
All other freehold-owners must be in agreement to your proposed extension; although they don’t all necessarily need to extend their leases at the same time. Their involvement/co-operation in the transaction may be required, depending on how the freehold title is held at the Land Registry.
It would be usual for a freehold-owner’s lease to be extended to 999-years with the ground rent officially being reduced to a ‘peppercorn’ (a legal term for nothing at all); albeit, you will not likely have been paying yourselves ground rent anyway.
The Team at Frettens have also dealt with 200-year extensions where that is preferable to clients as, after all, most buildings may not be standing in 999-years’ time!
To read the full article, click here: https://www.frettens.co.uk/site/library/frettensnews/do-i-need-to-extend-my-lease-if-i-own-a-share-of-the-freehold