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How to extend your lease if you own a share of the freehold?

Do you need to extend your lease if you own a share of the freehold? How much does it cost to extend my lease (£550 plus VAT and disbursements)? Do all the freehold owners need to consent?
We often get asked these questions when advising tenants about extending their leases.

If you are lucky enough to own a flat and a share of the freehold the good news is that the process of extending is relatively straightforward and the costs are fixed (and low).

The first step is to agree this with the co-owners. You cannot usually act alone however extending the lease will benefit everyone.

If your co-owners need convincing there are an number of very good reasons to extend your lease now and not wait to when they are selling or remortgaging when the pressure may well be on to resolve these issues.

Short Lease

The main reason people act is that they find that their lease is ‘short’.

Defining a ‘short’ lease is not an exact science – typically it means less than 80 years – but is driven by mortgage lenders instructions.

Many lenders ask their valuers to comment if the lease length has dropped below 80 years and they will not lend at all if the lease is too short – some buy-to-let lenders will not lend if the lease is below 85 years. This is because they will not take into account the share of the freehold when providing finance – either to you on a remortgage or,  if you are selling, to your buyer on their mortgage – because they cannot easily take a mortgage on your share in the freehold. This can make the re-mortgage or selling process more complicated or longer than necessary because you need to extend the lease first.

Whilst we often find ourselves helping freeholders to quickly resolve these problems where one or more tenants in the block are selling (even if they have a separate lawyer for the sale) it does place undue pressure on the seller in particular as they suddenly become reliant on the goodwill of their neighbours to deal with matters without delay – it only takes one owner to take a holiday at the wrong time and the whole sale could collapse.

It is worth pointing out that it is no cheaper to wait until the sale is progressing before extending your lease because as indicated above we often act for owners who are selling using another lawyer for the sale process. This is because our fees are fixed and competitive and are often lower than the bolt on costs of selling lawyer who assumes they have a captive audience.

Absent Freeholder

Even if your lease is not short it is still sensible to move as much value from the freehold into the leasehold interest in the flat especially if you hold the freehold in your personal names. This is because you cannot control your co-freeholders and if one was to become ‘absent’ it would be impossible for you to extend the lease without going through the complicated statutory procedure including Court proceedings and payment of a premium for the extension. This would defeat the object of owning a share in the freehold.

You may think it is an unlikely that one of the owners of the freehold would become absent but we have seen plenty of examples where it has happened and consequently the marketability or value of the other flats have been adversely affected.

The most common example is where the co-owners each own a share in the freehold personally however they fail or chose not to pass on their share on sale of the lease. They then move away and lose touch with the other owners. Sometimes this is forced upon owners if they are repossessed – the mortgage company has no right to transfer the share of the freehold so it is left with the old owner with the share of freehold. Again we have advised clients in situations where the repossessed former owner has demanded significant sums to hand over his share of the freehold many years down the line.

Difficult Co-Freeholder

Even if your neighbouring co-freeholder is around he/she/they may not be willing to assist in extending your lease.

You may assume that when you purchased the freehold with them this guaranteed you a ‘free’ lease extension. This was the assumption (by one owner) in a case of Parkes v Wilkes [2017] EWHC 1556 (Ch) where the two flat owners bought the freehold via collective enfranchisement. They signed a declaration of trust to hold the freehold in trust from themselves as tenants in common in 50:50 shares. After the purchase of the freehold one flat owner asked the other to grant them a 999-year lease extension. The second owner refused.

The matter went to Court and when the initial County Court hearing upheld the refusal it was appealed.

It was argued (quite sensibly) that the whole reason for buying the freehold was to get longer leases. The Court however did not agree.

Although the Court said they had the power to order such a lease extension they found there was no evidence to support that type of implied provision into the declaration of trust. Obviously the position would have been different if there was a written agreement between the parties – we often put this into the “Participation Agreement” at the beginning of the Collective Enfranchisement process or in a Declaration of Trust when you compete. Even correspondence between the parties before the freehold purchase would have assisted – a few emails confirming their intention.   You can read the case here http://www.bailii.org/ew/cases/EWHC/Ch/2017/1556.html

Why would a neighbour be difficult? It may simply be that you have fallen out over an unrelated matter or perhaps they want to buy your flat on the cheap. Whatever the motivation in the absence of an express agreement on the point you should try to extend as early as possible after the purchase of the freehold. Whilst not every neighbour will take it to this extreme some may try and extract something from you (for example they may want that loft space you consider to be joint or their legal fees paid) if you leave this to a vulnerable time, for example when you are desperate to sell or remortgage.

Even if you get along with your current neighbours if they come to sell on then you may find you have problems with their buyer. Best advice is therefore to extend when you are getting along!

Limited Company

It is sensible to hold the freehold interest in a limited company using special provisions in the memorandum and articles of association linking the ownership of the freehold automatically to the ownership of the flats. This would enable the Directors of the company to transfer a share even if it was not dealt with by the outgoing tenant and so to avoid the situation on resale or repossession mentioned above. If this is not set up in your company articles it may be worth amending them because you can have the same problem as with an absent freeholder and a repossessed former owner described above.

The downside to this is that there are basic requirements to file formal returns and accounts at Companies House, even if they are dormant, at least once a year. This can be done easily on-line but the penalties for non compliance are relatively high and this can result in the company being struck off the Company Register and dissolved.

The costs of restoring a company to the register is expensive and can take time. If the company has been struck off for more than 6 years your cannot restore it.

This means that even if the freehold is held by a limited company it is still sensible to move the value from the freehold to the leasehold by granting a long lease to each of the tenants.

Criss-Cross or Tyneside Leases

Technically these are not ‘share of freehold’ but rather split freeholds – the upper flat owner is the freeholder of the ground floor lease and vice versa. These types of leases (traditionally first used in Tyneside) but quite often found in relatively new maisonettes built by Laing Homes Limited in the 80s and 90s . The Laing leases in particular tended to be granted for 125 years initially and so now need extending. You can extend these as you would a share of freehold but obviously in this instance the upper and lowers owner must work together to extend each others leases at the same time.

Modernise and Fix

In addition you can also take the opportunity to modernise or fix any minor defects in the leases to make the resale easier in the future to ensure that it complies with current requirements in particular those set down by the Council of Mortgage Lenders and Building Societies Association.

Often we find that leases need amending or tenants want to change leases in the following areas:

  • ground rent – remove the need to pay ground rent by reducing it to a “peppercorn”.
  • restrictions on sub-letting – removing historical restrictions or barriers to underletting the whole of your property on an assured shorthold tenancy (AST). Although these covenants may not be enforced in practice if you want a “buy to let” mortgage your lender may pick up on the restriction and refuse to lend until the provision is changed.
  • changes to covenants on floor covering – a requirements for carpets in all areas to permit wooden flooring (with rugs or other suitable sound deadening) – although this can be controversial for some blocks.
  • insertion of a landlord’s “enforcement covenant” – again this is a fix which makes little day to day difference but will assist on sale and refinance.

How is the lease extended?

Generally there are two options available in relation to the format of the new lease, which vary the costs payable:

  1. New Lease – this involves a complete rewrite of the terms of all the leases in the building. The cost of drafting a new lease would be higher but for most blocks this is not required.  This would only normally be required if :
    1. the current leases are substantially defective in many respects; or
    2. the format of the lease differs throughout the building (they should be uniform in all key aspects)
  2. A deed of surrender and re-grant – this is a ‘short form’ of new lease which refers back to the majority of the terms of the existing lease and only amends the length of the term (normally to 999 years) and reduces the rent (again normally to a peppercorn). You can, if required, incorporate some minor amendment to the leases for example the addition a landlord’s enforcement covenant (a common defect). Most leases are extended in this way.

How can I tell what option we would need to use?

We will advise you on this when we look at the lease but if any of the flats in the building have been bought or sold recently, especially with a mortgage, then a deed of surrender and regrant is normally sufficient. This is because the solicitor who acted on the purchase would not have recommended the purchase of the flat with such defects or variations unless the lease was varied or indemnity insurance was put in place to cover the problem.

Of the many blocks of flats we have dealt with we have only recommended a new lease, as opposed to the surrender and regrant method, on a few occasions.

How much does it cost?

Typically the fees are fixed at £550 per flat plus VAT for a deed and surrender and regrant.

If there are a high number of flats in the building some economies of scale may apply for example on blocks with 10 or more flats we would charge £500 plus VAT if the leases were in a similar format. With very large blocks we often are able to put together information packs which can assist in discussions usually during an AGM. We also fix our costs for a period of years as it is unlikely in these cases that all flats are going to be extended at the same time.

Our costs will cover:

  • a review the titles and leases in the block;
  • recommendation of any changes required to the lease;
  • drafting the new lease;
  • obtaining consent from your mortgage lender (this is needed to transfer the mortgage from the old leasehold title to the new title);
  • arranging for signature by all parties;
  • dealing with formal completion, stamp duty and registration requirements; and
  • storage of the deeds post registration.

In addition to the legal costs there will be a charge for any disbursements incurred (per property). This typically amounts to :

  1. £9.60 for obtaining office copies of the leasehold title plus shared cost of obtaining freehold title;
  2. £4.80 for obtaining office copies of each lease or deed filed on your title;
  3. £6 for the electronic registration application; and
  4. £45 for registering the new lease at Land Registry.

In addition if you have a residential or buy to let lender they may charge an administration fee for consenting to this transaction (which can vary – many do not charge for example Nationwide, HSBC, Barclays, Halifax, Santander, NatWest but some do charge for example Virgin £100). It is rare for the charge to exceed £100.00 but this can happen for some more obscure lenders (such as Paragon (who charge £195) and CHL (who insist on outside lawyers who  charge £400 plus VAT on top of the fee of £90 payable to this lender)).  Limited Company/Commercial mortgages (linked to a portfolio) / private banks/ offshore banks may have wider requirements including searches.

It is worth pointing out that our fees cover the cost of acting for both the landlord and each of the tenants. There is never usually a requirement to have separate representation for both parties – saving further costs.

Where we can help

We are specialists in dealing with these type of matters. If you require information about a particular aspect or just want to talk through the options call or email Mark Sadler on 01708 757575  email mbs@ker.co.uk

As a next step if you think you might want to use us we can circulate confirmation of our fees to you and any other owners in the block (usually by email) with a short one page questionnaire (typically in the format of the attached) – once this is completed and returned we can start the process immediately.

 

 

Lease Extensions – Share of Freehold – Short Lease – New Lease – Cost of Extending a lease with a share of freehold – Share of Freehold Extending Lease – 50% share in the freehold – Freehold Management Company Extending lease

 

76 comments on “How to extend your lease if you own a share of the freehold?

Reply

i need advice as need to increase lease as it has dropped down to 60 years, also the downstairs flat owns the freehold apurchased owning the full freehold

nd are now selling, but they have taken the freehold from the property and it is now held by a ltd or private company, the problem is when the last people sold downstairs they offered me share of the freehold which i accepted, but these new buyers refused to complete unless they kept the full freehold, so we are now 2 years later and prices have increased, they want full market value, when i had agreed a deal with the last people, which these new people messed up by refusing to complete, surely i must have some kind of case as i had agreed to buy share of freehold and they stopped it from going ahead and now they are asking much much more…

Mark Sadler Post author
Reply

You have unfortunately lost out. The freehold can be very valuable and I can understand why the other owners want to hang on to it. You will have to go through the formal statutory lease extension procedure to extend your lease now – there is no “cheap” option I am afraid. As you say the prices are increasing and the lease is only getting shorter so a notice needs to be served as soon as possible.

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A very enlightening article, thank you. We have a slight variation on this situation. We have a leasehold on our flat, and a share of the freehold of the building (there are 2 other flats). Our lease still has c.950 years left, but the basement flat has just 59. They are looking to renew the lease. Would these standard charges apply in this instance? Is there a way of fairly capitalising on this situation?

    Mark Sadler Post author
    Reply

    It depends on a number of factors – for example did the owner of the basement flat pay more in to purchase the freehold when that was acquired to balance out the shorter lease length or was your lease extended for no premium in the past? You would need to look back at the purchase of the freehold carefully. There should have been a “participation agreement” between the flat owners setting out their respective commitments.

    In any case I would be cautious – obviously you can try and demand money but will the fallout/potential dispute with the basement flat owner be worth it in the long run?

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We have our flat on the market. 3 flats in the block. I am aware that one flat extended to 999 years not long ago when it was sold and a ltd company was set up. I’m unsure who the directors are. Our lease currently is 74 years. We need to extend but I just don’t know where to go or what to do I wasn’t involved in any of the set up it was all sorted by the lady that used to live upstairs. The freehold is split 3 ways.

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I am interested in buying a flat as a btl. It has a share of the freehold, but just 80 yrs on the lease. Is it possible to get the lease extended even if other flats are not participating? There’s probably about 10 in a large Victorian house, with a new bit built on the back. Why didn’t they do a 999 yr lease in the first place? I see from your bro, the only advantage of a lease, and not Co. is that accounts need not be fined etc. Is that right?

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Hello, I own a share of the freehold on a block of 3 flats along with 2 other landlords. It is split 40%, 30%, 30% as 2 of the flats are smaller. We have recently started remortgaging our flat and have found out we only have 83 years left of the lease. The lender the broker chose for our remortgage will not accept leases under 85 years. Would you advise extending the lease, and if so how should I sell this idea into my fellow landlords? Could you give me an approximate cost for doing this? Thanks

    Mark Sadler Post author
    Reply

    The other owners should be approached. There should be no reason why they should not agree. Our fees are as per the article above – £450 plus VAT and disbursements per flat.

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I wonder if you could offer some advice regarding my attempt to extend my lease which has just over 70 years to run. There are six flats in my block and we have obtained share of freehold and a limited company is in place. I am a shareholder. I do not live at the property and it is rented out. I recently asked one of the Directors what the procedure for the extension as she informed me that one of the flat owners had recently extended theirs. I was told contact your solicitor have them draw up the appropriate contract and it would be signed. Recently two other owners have done this and their leases have now been extended. I’m assuming they submitted a Deed of surrender.
My solicitor contacted the solicitor who deals with the limited company and this is where the issue started.
Both are asking for fees to be paid even if they are unable to administer the extension.
I believe the solicitor associated to the company was not very happy about the fact that she was not informed and has made her feelings clear by email to the Director. What would you suggest is the best way to resolve this matter?

    Mark Sadler Post author
    Reply

    Quite often you are asked by the solicitors acting for the Landlord to pay their fees up front – quite of often by way of undertaking through the solicitors whether or not the matter proceeds to complete. However you should be in control of this so there should be no reason why the matter would not complete. If you are in any doubt your lawyers can add a line into the undertaking to say that the fees will not be paid if their client (the landlord) unilaterally withdraws from the transaction.

    Generally however we do not work in that way where there is a share of freehold – we act for both parties – Landlord and Tenant – and we do not require the fees up front. However as the procedure is agreed in your block and firmly in place I would recommend that you go along with what is set down rather than trying to reinvent the wheel here.

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My lease is 72 years I’m currently renting and intend to buy the property. I’m in a block of 8 flats and each owner has a share of he freehold. The current owners of my flat have only owned it for 6 months. Does this mean they can’t apply for a lease extension? We have peppercorn ground rent but all have relatively short leases as far as I know, it concerns me for re-mortgaging purposes in a few years time.

    Mark Sadler Post author
    Reply

    There are two systems for extending the lease. Firstly the statutory route where you need to own the flat for 2 years and you get a 90 year extension and reduction of the rent to a peppercorn and secondly the agreed basis i.e. by simple negotiation.

    Usually the agreed basis is used where there is a share of freehold (because most owners purchased the freehold with the very intention to extend their leases). Often there is no charge made (apart from legal costs) for this extension but this cannot be guaranteed.

    Some lenders will already not lend on 72 year leases (many buy to let lenders are now looking at 75 years) so the issue of lease length is very relevant. You should check to see if there is a procedure in place to extend the leases or if any discussions have been had to move this forward and if so what are the proposed terms. Getting a block of flats to move forward on this type of issue can be very time consuming. The larger the block generally the longer it will take. If however the block is relatively small – save 8 or less flats you may wish to consider making your offer conditional on the lease being extended first.

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Hi. This is a helpful thread, but I have another question. I own a share of freehold split between 2 flats. The co-freeholder has no interest whatsoever in extending the lease, which is at 70 years. I think because he owns his flat and knows I need to extend mine to remortgage.. and thinks he maybe able to cash in. Can I serve a Sec 42 on the landlord (ie. myself & the co-freeholder) and when the landlord is unable to agree the terms of a counter-notice in time, take it to a court and seek a vesting order? Is there a less tortuous route?

    Mark Sadler Post author
    Reply

    There may be a background trust arrangement between the freeholders (written or implied) – do you have any documents from when the freehold was first purchased? This may include the participation agreement which should ideally include a desire for the leases to be extended once the freehold has been purchased. There may be other evidence. This could help you but again if there is no co-operation then there is still an expensive trip to the Court.

    Otherwise the section 42 notice is the only way to force the matter through. Once you have done this then just hang on to the freehold if you ever sell the flat and wait out your co-freeholder – when he wants to sell or extend the lease you should get your money back plus possibly some profit (as the lease should be lower and the value of the flat higher). If you point this out then he / she may well see sense.

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Hello,

I am looking for some advice on a potential flat I am buying in London. The flat is leasehold, with 94 years left on the lease. The freeholder is the commercial property on the ground floor, the head lease holder is the first floor flat above, and this flat I am looking sold with a sub lease for the 2nd and 3rd floor. There has recently been a loft conversion and full refurbishment of this flat, therefore the mortgage lenders are treating it as a ‘new build’ even though it is a old shell i.e. the original building outside. Is there a reason that the current sellers who did the refurb did not a get lease of over 125 years if this property is now being classed a new build. I am worried about purchasing the property and then for some reason not being able to extend the lease in the future, even at I am aware significant cost. Thanks

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Hi, I am in the process of buying a flat. Originally a house converted to 2 flats. I will own the freehold title of the building. The flat has a 86 years lease (not the 99 yrs we were told by the Estate Agent) picked this up when reading the contract. I would like to know, firstly if I transfered the freehold title to both my wife’s and my name could I grant myself a new lease? Would I have to pay myself a premium? Sounds stupid but an honest question. I have a residential mortgage in my name only. Also could I do this immediately rather than waiting 2 years.
Any advice is greatly received.
Fran

    Mark Sadler Post author
    Reply

    You can grant yourself a new lease (but not directly to yourself if the same name is on the leasehold and freehold title – use a nominee to grant the lease with you e.g. spouse or partner).

    You do not need to wait 2 years or charge a premium.

Reply

Hi Mark, we are 50% freeholder with one other owner (2 flats) and require a variation on existing lease and also a lease extension. The variation is the incorporation of what was formerly the common entrance hall into our lease as the other freeholder has extended and created a separate entrance to that property. We have been told that a full scale plan is required? Please can you advise? We are mortgage free but the other owner has a mortgage.

Reply

Dear Mark,
the house is divided into 2 flats, and myself and the owner of the other flat are both freeholders and leaseholders. However whilst he has a 999 leasehold, mine has only another 81 years ( was originally 99). I wish to extend the lease to 999 years. Do I have to pay the other freeholder to extend the lease and is the procedure more complicated in comparison to extending the lease when all flats have same lease length? And therefore is the fee to extend more expensive? I am meeting the other freeholder in a few days to open preliminary discussion.
Thanks for your advice.

    Mark Sadler Post author
    Reply

    There can be a risk here that the owner with the longer lease chances his or her arm and asks for payment or some other benefit (such as transfer of a part of the communal space such as the loft) in return for consent. They may just refuse to cooperate entirely.

    This may be motivated by all sorts of reasons for example they want to buy your flat cheaply or they have fallen out over some other matter such as communal repairs or consent for alterations. This is why you should, especially in small blocks, extend together and not be the last flat with a short lease.

    A recent Land Registry dispute highlighted this problem where a new owner to a block of four, who were all extending their Leases together, found their lease extension was blocked by the other three as soon as they completed their purchase on the assumption they could demand a payment from the new owner.

    Thankfully most owners get on and cooperate on the basis that they or the predecessor received a free lease extension in the past or even if they had a longer lease when the freehold was purchased they paid less towards the cost at that stage.

    Obviously you need to press on with discussions with your neighbour as your lease is only getting shorter.

Reply

Hi,

I wandered if you could help, I purchasing a flat which is in a house coversion including 2 other flats. It is share of the freehold, and I have just found out the lease is 85 years. Would all 3 flats have to agree to extend the lease? Or can I extend the lease on my own flat only?

Thanks

    Mark Sadler Post author
    Reply

    You need agreement from all owners but with that you can extend just your lease but you cannot do it alone without these consents.

Yve
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I am the freedholder with the other flat above me his lease requires a variation with amended plans attached to it to show the room in the loft and at the same time He would like to extend my lease to 999 years for there is only 63yrs on our leases.It seems to make sense to do the variation and extension at the same time. These require both of our signatures as freeholders .my questions is would imonly pay for the extension of the lease if we just use one solictor ? Please advise and what would be the cost to do this and how long does it take?
I believe
There is no requirement for me to do this but in the long run it seems to be the sensible thing to do.

Thanking you

Reply

I own a flat with 75 years on the lease, and a share of the freehold. Do I need permission from the other freeholders to grant myself a lease extension? Thank you.

Reply

Hi Mark. I bought a flat (one of four in the block) where the other three residents own the freehold in a limited company. The lease is around 100 years to run and I’m not aware if the other residents/freeholders have extended their leases.
Should I buy my share of the freehold first and then ask to extend the lease, basically is their a preferred order of doing these (note the cost to buy the freehold is around £1k and the flat is worth around £130k).
Thanks
B

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Hello, i am a joint freeholder of a 2 flat terrace and am looking to extend the length of the freehold / lease. Can I do this on my own, if the joint-freeholder consents ? He is somewhat unwilling to go through the process himself, but willing for me to do so, to get it done. Does the joint freeholder need to go through the same process as I will, so we act ‘in concert’, or can i do it alone? Thank you for advice, David

    Mark Sadler Post author
    Reply

    He can consent to you extending your lease on his own if he wishes but it is better especially when he is going to end up with a new co-freeholder when you sell (who may be difficult to get on with and refuse to help time extend his lease) to do this together in a building with two flats to avoid this risk.

Reply

I’m about to buy a buy to sell property (flat) with just 55 years on the lease. Should i aim to buy the freehold and extend the lease or just pay to extend the lease. I am looking to refurbish and sell on quickly. This is a house divided into two flats.

    Mark Sadler Post author
    Reply

    This may be a problem.

    As the purchase of the freehold (collective enfranchisement) involves the neighbouring owner then it may be difficult to organise them – they may not co-operate or have the funds to purchase the freehold. However you can be involved in this process from day one of your purchase.

    If you purchase the flat you do not have a right to a new lease through the statutory procedure for 2 years (from the registration of the lease in your name) so they landlord may not deal with you or demand excessive amounts for the lease extension.

    Have you considered negotiating directly with the landlord at the same time as the purchase of the flat – you could then perhaps co-ordinate the purchase of the flat with the new lease. Otherwise you would need to get the seller to serve a statutory notice (on the basis that they qualify for a lease extension under the 2 year rule) and take an assignment of that notice so you can complete the statutory lease extension in your name.

Reply

Hi,

I offered on a flat and just before exchanging, my solicitor discovers the basement is not included in the demise.

The council are the freeholders and are unable to confirm if they own the basement.

I’d like a quick resolution and wondered what the options are? The sellers are willing to sell without the basement at a reduced price, but we have no idea how to estimate the cost.

What would you advise regarding estimating cost of purchasing the lease for a basement?

Thanks

    Mark Sadler Post author
    Reply

    This is a valuation issue unless of course there is a mistake in the lease (was this originally a right to buy lease?). It is difficult to give specific advice on this without seeing all the documentation.

Reply

Hi there
I wonder if I could ask your opinion, with a view to contacting you for further professional help ASAP. In short, I own 1/4 share of freehold on a flat I own. One of the flats was granted a ‘free’ lease extension 10 years ago to assist in the sale of their property. The rest of us (3 flats) now need to extend our leases as we only have 60 years unexpired, the new owner/freeholder of the flat who has already benefitted from a free extension is most unpleasant and is obstructing the lease extensions going ahead unless we essentially pay for them at full market value – we have tried explaining that is the whole purpose of why we bought the freehold ie to grant everyone at no cost – but he is having none of it and even though we called an EGM to gain a majority vote to allow the extensions to go ahead, he is contesting this, siting minority shareholder abuse and threatening legal action. Where do we stand? Can a majority vote not rule in this instance?
Thanks in advance
Mary

    Mark Sadler Post author
    Reply

    This is why blocks should ideally extend together. There is no easy answer without reviewing all the documentation. It may be that an expensive trip to court will be the only way to resolve this.

Reply

Good afternoon Mark,

I own the freehold of a first-floor flat whilst the ground floor flat is leasehold (70+ years). We are keen to change this to a share of the freehold. Other than legal fees, I can’t fathom what costs are involved (if any) ?

Thanks.

damiano
Reply

Hello,

I have owned a ground floor flat in London since 2013 with 50% of the freehold of the building (2 flat/floors semidetached house). The previous owners that sold us the flat kept the other 50% of the freehold to themselves. They have now decided to sell that remaining share to the owner of the upstairs flat, which so far only had a leasehold.
They asked me if I was interested in buying it and I said no, so they have offered to the upstairs owners and agreed on a figure (11k £). I now need to sign the contract stating that I am happy with this (which I am).
On the contract however there are two clauses that I don’t feel comfortable with.
let me quote:
1) the transferee agree and declare that if either shall transfer the leasehold interest of either flat (top or bottom), the transferee shall simultaneously transfer without payment his share of the freehold title.
2) the transferee shall at the request of either of them extend the existing terms of the registered leases for a term of 125 years at a peppercorn rent and without payment.

now my doubts:
1) by signing this i am agreeing to sell my share of the freehold when i sell my flat in the future. While i will probably want do this, why am i being asked now to sign for something that i will decide when the time comes? what interest do they have in what i do with my own share of the freehold? What if i decide that i want to keep that share and sell it later on, just like the previous owner is doing now? why is it any of their business what i do with my share?
2) by signing this i am agreeing of renewing the leasehold for free to the other party (and viceversa). However, while my leasehold has over 120 years remaining, the other one only has 67 years left. Am I not entitled to a payment to renew the remaining 50% of the freehold? Why should i let the other party renew for free something that I could end up getting some money from? renewing a short lease like that will likely run between 25 and 30k£, am i wrong assuming that i am entitled to half of that?

Another thing worth mentioning is that we are tenants in common. I am the transferee and the transferor. in other words the remaining 50% of the freehold would go from Mr A (myself) and Mr B to Mr A and Mr C

I would appreciate any advice!!

thank you

Andy
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We are looking to arrange the purchase of the share of Freehold for our block of flats in part to remove Network Homes who have stolen, over charged, manipulated & mistreated the residents for long enough.
before we proceed we have been trying to calculate our individual expected costs. I understand that the Freehold premium will be divided by different percentages depending upon the different sizes and length of lease.
Can you confirm how are the rest of the cost divided?
(Such as old and new management company fees, Freehold solicitors fees, Barrister’s fees most of which are billed by the hour not the dictated by the property type /condition, etc.. – Equally, by size, by length of lease) ?
Also is this something you can us manage and arrange should we look to proceed?

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Hi,
We are looking into buying a flat in London. We came across a maisonette that we like, however we have been informed that there are less than 50 years left on the lease and a missing freeholder. The price reflects that and makes it attractive. Can you please shed some light on how difficult it is to buy the freehold or extend the lease in situations like this. Will any lender agree to lend a small percentage of the purchase price, say 25%?
Thanks

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Hi Mark,

I own one of two flats in a building and own a share of the freehold. The lease on my flat has 68 years remaining. I am looking to sell my flat (and my share of the freehold) and in order to do so I need to extend the lease. Where it becomes complicated is that the other flat owner is not the freeholder. The freeholder remains the previous owner of the other flat (due to the current owner’s mortgage arrangement).

Assuming all parties are able to reach an agreement (we are all currently in contact), can you foresee any potential obstacles in the joint freeholder selling their share to the current owner of the flat (leaseholder) and at the same time extending the lease on my flat, enabling me to move forward with the sale of my portion?

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I have purchased a property with a 72 year lease which includes a share of the freehold. I was originally told that extending the lease would be straightforward with just the solicitors fees to be paid. However, on contacting the managing agents I have been told that the first step in the process is to have the property valued (I didn’t have this done when buying as I was a cash buyer) at an approximate cost of £500 plus VAT. Would you be able to confirm if this is correct please?

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Hi
I’m in the process of purchasing a freehold on my flat which ihas a 61 year lease lm buying the freehold with the owner of the flat above who lets out his flat,he also has 61 years left on his lease but he does not want to extend his lease until he sells as we own the freehold but he is experienced in buying property and it my first time but l would really like to extend my lease when l purchase freehold can l do that without his input or does he need to do it also and how expensive is it

    Mark Sadler Post author
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    You must have an agreement to extend your lease in this case. There has been a recent case along the same lines where in the absence of an express agreement between the two leaseholders there would be no lease extension for either party implied by the courts. As the lease extension cost is relatively minimal (see article above) I would not see this as a barrier to it happening.

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Hi Mark. Thank you for a great article.

I own a flat in a block of 12 and a share of the freehold. My lease has 52 years remaining. To extend the lease I inquired with the solicitor of the residents limited company. The solicitor said the option to extend the lease to 999 years is open to me and will be a simple form of Lease by Way of Renewal. She has suggested to sign the lease in escrow and they will hold onto it it until further dealings regarding the lease such as a re-mortgage or sale of the flat, at which point it can be dated. She states it’s more convenient as it will be the cheaper option. However, before anything begins I must pay the legal costs and disbursements. Is it wise to take this advice or am I setting myself up for a fall?…as there has been no mention of any premiums to be paid to the other freeholders. Do I assume it’s a free extension of the lease! Mark, you’ve mentioned it’s wiser to get the value of the freehold into the leasehold and the sooner the better. So, is it wiser not to go down the lease in escrow route and to actually get the renewed lease signed, dated and registered now? For the latter, can I request amendments? Any guidance truly appreciated.

    Mark Sadler Post author
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    It sounds like a free extension but I do not see why this should be signed and then held in escrow. Until registered your title will not be updated and there may be queries (requisitions) raised by the Land Registry when you come to register it (who may spot errors on the deed). What would happen if the company failed or the signatory for the company had died between now and date of the deed.

    As the Land Registration fee is only £40 I cannot see the benefit in waiting to complete the deed and register it later. I would rather see the title updated fully.

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Hi there, I am looking to sell my flat as I own the freehold together with the flat above I thought it negated the lease. However, I’ve just found out that the lease still stands. I’ve only got 67 years on it and the flat above has 59 for some reason. How long does a lease extension take to complete? I am assuming it’s something I’ll have to do before I sell the property? Many thanks.

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I need some advice. I own an upstairs flat in a converted house – there is only one other flat downstairs. I bought the freehold approx. 7 years ago as I wanted to convert my loft.
The downstairs owner needs to extend their lease but is asking instead to buy 50% of the freehold. I am uncertain if this is the way to go. My lease is getting low (I stupidly didn’t extend when I bought the freehold) and he has suggested increasing both leases in return for buying 50% of the freehold. Is this a good move? My instinct tells me to hold onto the 100% of the freehold.

    Mark Sadler Post author
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    I would not sell the freehold interest while you own the upper flat. Obviously this depends on the price he/she is prepared to pay!

    However there is not going to be a significant difference between what you would receive when you extend his lease to a share of freehold. You can get a good guide of the lease extension cost from http://www.lease-advice.org which is a very useful site for leaseholders/freeholders in general. Dont’t worry about the costs – if the neighbour wants to extend under the statutory route he is require to pay for your valuation fees and legal costs. We can sometimes negotiate better terms (for you) that the statutory route depending on how urgent it is for the neighbour to extend. I can advise more specifically if you instruct me.

    We can also normally extend your lease now as you own both freehold and leasehold (this needs to be carried out in a specific way to avoid the rule about not granting a lease to yourself which is the Rye and Rye case). The cost will be a little bit more than noted above but contact me directly for a quote.

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i need to extend a lease on a flat which has a share of freehold and has unexpired 53 years of lease.
unfortunately the freehold is owned by a company of which i have a share and other two people have a another two shares, unfortunately one company . owns the other remaing 5 shares and its owner is also the sole director of the comany who owns the freehold> they are being difficult in giving the amount of premioun which they will request to give us three another 99 years of lease. Anything can be done to stop the monopoly acquired by the major shareholder?

    Mark Sadler Post author
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    A minority shareholders claim would be expensive. It may be that the majority shareholder is not doing anything wrong provided the “profit” from the lease extension is distributed to the shareholders in the proportion of their shareholding and that either he/she has not given themselves a free lease extension in the past or when they do the profit is split the same way.

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At the conclusion of the process, is the Freeholding company invoiced or are individual invoices sent to each of the Leaseholders? If the former is the case, how are the leaseholders protected for professional indemnity purposes? Thank you

    Mark Sadler Post author
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    Either can be invoiced. Our duty to our client is not determined by who pays the bill. Quite often third parties pay the bill of our clients for example when we act for a landlord in a statutory lease extension the tenant will pay (the majority) of the landlord’s bill. Our professional duty remains with that our landlord client.

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Dear Mark, we are six flats all with a share of the freehold. Two flat have leases much below 80 years and one with 81 years, and want to extend. Other three flats have previously extended their lease on purchase of their flat and have 125 years and two at 155 years. Must the leaseholders who want to extend lease have a valuation and pay premium or marriage value to the freehold limited company or should a resolution be signed to agree extension with nil premium and peppercorn ground rent. The others may also want to extend their leases to 999 years also. Also does your firm provide lease extension service to clients in north London?

    Mark Sadler Post author
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    We do provide assistance in North London. It is perhaps something we can discuss but a premium payment is not necessary.

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Hi Mark, very interesting article. We are two flats with share of freehold. We have drawn up draft new leases.
What’s your firm’s fixed cost for a new lease transaction including reviewing the drafts (option 1 in your piece).
Thanks
Alex

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Dear Mark Sadler,

Me and my wife are in the process of buying a share of freehold flat. However the lease of the property 65 years. We asked the freeholder to extend the lease to 999years and remove the ground rent. The freeholder has agreed to this but the freeholder is taking long in providing the paperwork to extend the lease. It’s been almost 2 months and the freeholder still hasnt provided the documentation to extend the lease. Is there anything we can do to force the freeholder to provide the documentation quicker.

Kind regards,

    Mark Sadler Post author
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    I am afraid not but this illustrates that owners of share of freehold flats should not leave the process of extending their lease to the point of sale as it is invariably a stubling block/ cause of delay.

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Mr Sadler, I own a property within a building, with a share of the freehold, there are 5 flats and 4 registered owners. I have downloaded the Title Deed this morning to confirm the current names. I have 99 year lease from 1998 and would like to extend this to ensure any re-mortgages or future house sale are supported by a decent lease term. What would you suggest is my next step?

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Hi Mark, thank you so much for sharing your experience on this.
We have seen a flat to buy that is ‘share of freehold’ and 80–year lease (unexpired). Not hugely sure what that means and struggling to find out.
Thank you for any pearls of wisdom you can share.

    Mark Sadler Post author
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    Best advice is to purchase conditional upon a lease extension being granted. This should not be too difficult to organise provided the overall building is not too large.

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Do I need to wait 2 years to extend a lease on a property I am purchasing that includes a share of the freehold?
And does a 999 year extension cost more than a 90 years extension?

    Mark Sadler Post author
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    No. Normally there is no premium for either a 99 or 999 year extension (most are 999 years with share of freehold) but your lawyer should check that one will be granted for free.

zul
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Hi Mark, I am selling a flat with a share of the freehold in a 4 flat converted block. The freehold is owned by a limited company. I own the other 3 flats and intend to sell these within the next year. All leases have 154 years to run(created on conversion in 2015). The buyers solicitor is insisting on a deed of variation to make the lease 999 years on peppercorn before committing to the purchase. Is this a valid and fair request given the lease has so long to run? Apart from the fees already mentioned in the blog, are there any other fees such as SDLT?

    Mark Sadler Post author
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    I assume the buyer is concerned that you own the other 3 flats and on a basic level they cannot out vote you. Should you refuse a lease extension in the future they will not be able to do anything about it even though this is not pressing at the moment. If you grant the the lease extension direct to the buyer the SDLT would be the buyer’s problem. I do not give tax advice.

Al
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Hi Mark, This is an excellent blog. I am interested in buying my first flat, in an 8 flat building. These are the details I have on the freehold/leasehold:

Tenure: Share of Freehold (Underlying lease 125 years from 1975, currently being extended by the fellow Freeholders to 999 years).

To take this part ‘Share of Freehold. Fellow Freeholders are in the process of extending’, is it therefore possible to ask for the sale to go through only when the new freehold extension negotiations are complete, and therefore I am buying the 999 extended freehold already in place? You estimate it’s around 4-6 weeks for this stuff to be finalised on the other freeholders’ side, so it should easily be in place for this sale (it’s been on the market for many months). If I don’t do I a) have to wait 2 years to get it extended myself, and b) potentially be blocked by the other freeholders?

Many thanks…

    Mark Sadler Post author
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    In your circumstances where the lease appears relatively short I would recommend that your purchase takes place at the same time as the lease extension being completed.

MvH
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Hi there,
I am about to buy a flat in a building with two flats, where both flats own a share of the freehold. My lease is 87 years so I think it will be important for me to extend the lease swiftly after the transaction has completed (for remortgaging and to avoid the risk it goes beneath 80). What do I need to ask my solicitor to check in order to work out if I might face the risks outlined in your article (i.e. absent or difficult other shareholder)? What documentation do I need to request & what steps can I take to be reassured that I won’t face those issues? Are the documents on land registry helpful?

additionally, how would I be able to tell what type of lease extension will be needed? I.e. new lease or deed of surrender and regrant

Thanks in advance

    Mark Sadler Post author
    Reply

    The best thing to do is extend at the time of purchase. Don’t wait if you can help it. If you cannot then you need to be satisfied that the neighbour will agree down the line and is of a similar mindset to you but not everyone is sensible or indeed realises that having the freehold share does not mean they can sell or refinance freely. There is however still a risk that the neighbour changes their mind or falls out with you so try to stay on their good side until you get it done.

      MvH
      Reply

      Thanks for the reply! How would I go about doing this? Can I ask my solicitor to make it a condition of the sale?

BDE
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If there are five director/shareholders of a freehold owning management company and one wants a lease extension, three of the others agree it but the fourth will not agree it, can the three out-vote the fourth and grant the extension or does it require all four to whom the lease does not pertain to agree for the company to grant it? If the three can proceed without the fourth’s agreement, how many of the three are required to sign the new lease in the name of the company?

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Hi Mark, is the fixed fee to extend a share of freehold lease still around £450? I appreciate this article is a few year’s old. I am shopping around as I need to try and get it as cheap as possible (to persuade the upstairs owner to extend the lease with me). many thanks, Jon

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