Long Leaseholds

A long lease is one which was originally granted for a fixed term of at least 21 years. That is the only requirement. It is irrelevant if less than 21 years is left to run, or if you are not the original leaseholder.

Applications to renew a long lease.

Long leaseholders have the right to renew their lease for another 90 years providing certain requirements are met. Providing the new lease is over a qualifying building, it will take effect immediately and replace the previous lease. The leaseholder is given 90 years plus whatever years were remaining on the previous lease (called the ‘unexpired term’). The new lease is on the same terms as the previous lease and will include all property normally enjoyed with the flat such as a garage, yard, parking space or garden

An applicant must be a qualifying tenant or a qualifying resident and have a lease over a qualifying building. · Qualifying tenants are leaseholders who were originally granted a term of at least 21 years. · Qualifying residents are those who have occupied their flat for at least 3 years. · Qualifying buildings are those not sited on land belonging to the National Trust or the Crown (a government department) or within the precincts of a cathedral.

The application must be made to the ‘competent landlord’. This is the landlord with sufficient interest to grant the leaseholder a 90 year extension. In most cases, this is the freeholder or immediate landlord. Usually these will be the same person. The leaseholder must first serve a Tenant’s notice on the competent landlord. This simply outlines a formal wish to extend the leasehold and offers a buying price (called the ‘premium’). The landlord replies with a Counter-Notice. Normally, the leaseholder’s claim is acknowledged but the price is rejected.

The price offered should reflect the landlord’s loss. In practice, a mutually acceptable price is often negotiated between the two parties. However, disputes can be referred to the Leasehold Valuation Tribunal. Professional valuation is needed before any attempt at lease extension is commenced as it is essential to have the finance required available

Apart from on a few limited grounds, a landlord cannot oppose an application to extend. Hence, a landlord will simply negotiate and fix a price after serving the Counter-Notice. However some landlords are obstructive. They insist on every procedure being followed to the letter. Provided the legal formalities are complied with, the landlord will have no choice but to extend your lease, even if he has no wish to.

Applications by leaseholders to purchase the freehold (enfranchisement).

In reality, long leaseholders are only glorified tenants. When the term of their lease comes to an end, the property reverts back to the landlord who owns the freehold, and the leaseholder loses the capital value of their home. Accordingly, leases with only a few years left to run are often difficult to sell. Banks and building societies will not lend on properties less than 50 years to run. Provisions therefore exist to allow leaseholders to buy their freehold. The purchase will include not only the building but also any other property enjoyed such as garages, parking spaces, gardens, yards or sheds. Long leaseholders of flats have the right to join together and collectively buy the freehold to their block. They will not buy the freehold to their flat, but rather a share in the freehold of the entire building. Leaseholders must join and act together. No individual can exercise enfranchisement alone. In practice, getting a sufficient number to agree can be a problem. Normally, the leaseholders will create a limited company to acquire the building’s freehold. Each leaseholder then becomes a shareholder in that company which will own the freehold and control the day-to-day management of the building. The company can also grant leasehold extensions to each of the leaseholders as well as taking over the essential maintenance and management of the block. Consequently, buying the freehold can remove a number of difficulties long leaseholders suffer in relation to their landlords. It is usual for applicants to buy the freehold of their premises to first make conditions for the running of the company: Qualifying tenants are leaseholders who were originally granted a term of at least 21 years (it does not matter if less than 21 years are left to run) Qualifying residents are those who have occupied their flats as their principal home for at least the last 12 months. Qualifying buildings are those which contain two or more flats held by qualifying tenants and where such tenants hold at least two-thirds of the total number of flats in the building Qualifying residential use means that at least 90% of the building’s floor space must be residential. Provided all four conditions are complied with, leaseholders have the right to apply collectively to buy the freehold. The application is made to the freeholder. The leaseholders must first serve an Initial notice on the freeholder. This simply outlines a formal wish to buy the freehold and offers a buying price (called the ‘premium’). The freeholder replies with a Counter-Notice. Normally, the leaseholders’ claim is acknowledged but the price is rejected.

The price should reflect the freeholder’s loss. In practice, a mutually acceptable price is often negotiated between the two parties. Professional valuation advice will usually be needed before any attempt at enfranchisement is commenced. In practice, the leaseholders will have to pay the full free-market price for the block plus compensation to the freeholder plus the freeholder’s reasonable costs (as well as their own). It is important to ensure that all the tenants involved in the purchase can afford their share of the costs. Apart from a few limited grounds, a freeholder cannot oppose an application to enfranchise. The main exception is a converted building with four flats or less in which the landlord has lived in one of the flats as his main home for the last 12 months It does not matter if some of the flats are let on short-term tenancies. Moreover, it does not matter if some parts of the premises are used for business. These interests will be bought by the premium.

Leaseholder disputes.

It is a common complaint that freeholders (through their managing agents) charge too much for the management and service provided or that the service is not of a proper quality. Leaseholders have the right to ask for information on how the charges are calculated and if necessary to challenge the service charge and if appropriate apply for new management. The landlord’s obligations will be set out in the lease, which will specify which items the landlord can recover through service charges. Typical items include repairs, lift maintenance, portering and gardening. The lease will also state what share of the overall charge each tenant is required to pay. The law provides that such services must be provided to a reasonable standard and at a reasonable cost. This will often include an item for insurance as part of the service charge. Leaseholders sometimes complain that the premiums are too high and the cover inadequate

Leaseholders may either individually or jointly:

· Challenge unreasonable service charges
· Ask to see a summary of how the charges are calculated
· Ask to see the accounts and receipts upon which the charges were based
· Have an accountant or surveyor audit your landlord to see whether his/her management systems are efficient
· Ask the landlord to provide information about the insurer
· Apply to have a different insurer appointed

In extreme cases, where the management is particularly unreliable, leaseholders can apply to the Leasehold Valuation Tribunal to have the existing management removed. The leaseholders can then take over the running of the building themselves or (more commonly) appoint new management. Alternatively, leaseholders may remove the errant landlord by buying the freehold from under him (compulsory purchase).

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