A feature of many developments in a crowded city like Portsmouth and Southsea has been the growth in the number of purpose built flats, or conversion of larger houses into smaller flats, and sold on long leasehold terms.
It is not readily appreciated however that the ownership of a long leasehold flat is a diminishing asset. The lease becomes less valuable the fewer years that remain unexpired.
The law, however, provides that the leaseholder has a right to extend their lease, if the flat has been owned for more than two years. Legislation provides that the lease is extended by 90 years added to the unexpired term of the existing lease, at a “peppercorn” rent – i.e., no ground rents are payable.
The freeholder is entitled to payment for the lease extension, based on a technical valuation in accordance with the relevant legislation.
A leaseholder has a choice to negotiate a lease extension by seeking to reach agreement. If no agreement is reached, then the leaseholder can make a formal application by serving a statutory Notice on the freeholder.
It is important to note at the outset that however terms are agreed, the leaseholder is responsible for paying the freeholder’s reasonable legal costs and their surveyor’s fee, as well as their own costs for dealing with the matter.
Many building societies and mortgage lenders will not lend on the security of a flat where the unexpired term is less than 80 years, so check your lease!
These notes are intended only as an initial guide. If you are a freeholder or leaseholder, you should always take legal and expert valuation advice.
D M Nesbit & Company have been involved with the development and sale of flats since the 1960’s and have considerable experience in dealing with these matters and welcome your enquiry. Prepared by David M Nesbit FRICS Chartered Surveyor & RICS Registered Valuer
For more information contact:
7 Clarendon Road, Southsea, Hampshire, UK, PO5 2ED
Tel: (023) 9286 4321