Leasehold extension enables a leaseholder to increase his duration of residence in a property. Leasehold extension requires payment of fees that range from the solicitor’s fees to the actual cost of the extension. All these fees add up to a given total amount of leasehold extension cost. The cost can be broken down into solicitors fees, lease valuers fees, the cost of doing research and the premium for a lease extension. Each cost has a role to play in the whole extension process.
The first person, a leaseholder, must contact is a solicitor. Leaseholder’s solicitor plays a crucial role in making leasehold extension a success. Solicitors advise their clients on possible ways of extending leases and also help in researching and documenting lease extension. A contract can be negotiated informally or through a legal framework.
Informal Leasehold Extension
The informal lease extension is when a leaseholder and his landlord agree on terms of extension by themselves without involving the law. The landlord does not get a notice of lease extension. Statutory laws of lease extension such as the 90 year extension period, zero ground rent and others are not necessarily adhered to. Informal lease extension can be cheap at face value. However, unscrupulous freeholders tend to hide subtle clauses in the agreement that will turn out to be even more expensive to the leaseholder. This is why it is important to have a solicitor help you scrutinise the lease for any hidden detrimental clauses.
Formal Lease Extension
Formal lease extension follows statutory laws of extending contracts.The leaseholder has to send a notice of lease extension to the landlord. Every negotiation is carried out within the confines of the law. A landlord cannot reject duly served notice without proper grounds. Reasons for rejecting lease extension include breach of current contract by the leaseholder. Formal lease extensions are usually more expensive than informal ones because they require the involvement of many parties. A solicitor can help you estimate the cost of either method of conveyance. A leaseholder must pay conveyance fees to both his solicitor and his landlord’s solicitor.
The solicitors assist in negotiating an agreement and filing documents. The solicitors act as mouthpieces of their clients. They also settle disputes in court on behalf of their client’s. The most common cause of conflict is the freeholder’s failure to respond to the notice of lease extension. Each solicitor’s fee is usually around £1,500.
The major cost of lease extension is the premium. For a lease extension, a leaseholder must pay a premium to the landlord. The premium is calculated based on the location of the house, the current ground rent and the duration of the new lease. A leasehold valuer can give an estimation of the premium. The value of the premium must be included in the notice served to the landlord. The landlord can accept the premium or ask for adjustments. Once a premium is agreed upon, the owner should get either 10% of the premium, or £250, whichever is greater. If the landlord rejects notice for a lease extension, the leasehold can apply for a hearing in a tribunal. The landlord pays expenses for a lawyer representing him in the tribunal.