Frequently Asked Questions - I want to...
Leaseholders have a legal right to act together to buy the freehold of their building if they meet certain qualifying criteria. This is known as "Collective Enfranchisement" (CE). Qualifying Leaseholders will be required to serve a "Section 13" notice on their freeholder announcing their intention, including their proposed premium.
How do I qualify for the CE process?
- There must be at least 2 flats in the building. A single leasehold flat above a shop would not qualify.
- No more than 25% of the internal floor area excluding common parts must be in non-residential use. This applies to shops and other commercial units, below flats (including basements).
- There is no need to be living in the flat. You simply need to own a long lease of the flat (with an original term in excess of 21 years when granted).
- At least two-thirds of the flats must be held by qualifying leaseholders, however where a leaseholder owns 3 or more flats solely or jointly, these flats will not qualify and will not count towards the two-thirds.
- Under the formal route where you serve a legal notice (Section 13) on the freeholder, the participating leaseholders must own at least half of the flats in the building to qualify. However, where there are only 2 flats in the building both must participate.
This is not an exhaustive list and you should seek professional advice before serving a Section 13.
If you qualify and want to proceed:
- You will need a valuation carried out by an RICS Qualified Surveyor. See Useful Links/Property Owners;
- You will need to instruct solicitors to put forward the Section 13 notice;
- You will be liable for the freeholder's reasonable legal and surveying costs in responding to your Section 13 notice, and will be required to provide access to the property for valuation.
Please note we do not provide valuations for Collective Enfranchisement to lessees, or offer our freeholds for sale. Lessees must serve a Section 13 notice if they wish to purchase their freehold.
If you are thinking of buying your freehold because you are unhappy with your management however, please do give us a call or write so we can discuss.
A lease is a right to occupy a property for a set period of time. The shorter a lease becomes the less valuable it becomes, and the more difficult it will be to secure a mortgage against.
Who Qualifies to Extend?
A leaseholder will qualify to extend their lease if the original lease term was for more than 21 years when originally granted, and the current leaseholder must have owned the lease for at least 2 years. This does not apply to Commercial Tenants - only Residential Leaseholders will qualify.
This is not exhaustive and you should seek professional advice from a qualified Surveyor or Lawyer.
What's the Process?
Statutory time limits apply and starts when the Leaseholder serves a "Section 42" Notice on the Freeholder, announcing their intention, their qualification to extend and the premium they are proposing to pay. The leaseholder is also required to pay a deposit of 10% of the proposed value of the lease extension, to indemnify the freeholder's reasonable legal and surveying costs (which the lessee is liable for).
The Landlord has 2 months to either accept the notice and premium, or serve a Counter-Notice on the Leaseholder specifying the proposed premium they would accept.
If the two parties cannot agree the premium or other terms (i.e. whether the claim is valid) either party can apply to the Leasehold Valuation Tribunal (LVT) to determine, following which the Tribunal's decision will be binding.
This is far from an exhaustive criteria, but sets out the typical path for most Lease Extensions (the vast majority of which never reach LVT).
How Much will it Cost?
The valuation will be broadly based on 3 criteria - the "marriage value" (not applicable if the lease is over 80 years), which is 50% of the uplift between the current and the new long lease; the "term" or the value of the ground rent payable to the freeholder, which will be reduced to nil on extension; and the "reversion" - which is the compensation to the freeholder, for not receiving the flat back at the end of the current lease term.
Needless to say the valuations are complicated and often baffling to the untrained eye. Leaseholders should have a valuation conducted, which can be provided by your freeholder.
Please note, Leaseholders are required to pay the Freeholder's reasonable legal and surveying costs once they have served Notice, regardless of whether the lessee completes the lease extension process.
Help! I need the lease extended to sell, but don't have the money!
This is not a problem - give us a call and we can explain how you can market and sell the property on a long lease, and pay for the extension out of sale proceeds when you complete. This means you will not need to pay up front, and the buyer will purchase a flat with a long lease. Most of our lease extensions are conducted this way.
Where Do I Start?
If you would like a valuation from your freeholder to extend your lease, please send us the following:
- A cheque payable "Homemade Properties Limited" for £400 (+ VAT), to cover half the surveyors valuation costs (the balance is payable if the lease extension completes). If a bank transfer is easier, please email us for bank details. This is a non-refundable deposit, but will be deducted from the Freeholder's costs if you proceed with the Lease Extension;
- Your contact details - we will require access to the flat to carry out the initial valuation;
- Brief property details - a recent floor plan if you have one (from sales particulars perhaps), alternatively please tell us the number of bedrooms, living rooms and bathrooms, if it has outside space and what floor the property is on;
- Current valuation if you've had one recently, and whether that was on the basis of the existing or a presumed long lease;
- How long have you owned the property and if you recall, how much did you pay when you bought it?
- If you are in the process of selling, please tell us what stage your sale is at, and which Estate Agents are acting for you.
If you're one of our lessees and want to discuss any of the above, please give us a call.
Qualifying Lessees can exercise their Right To Manage and setup a Right To Manage Company (RTM).
Taking over the management of the Freehold requires the participating lessees to enforce the covenants of the Leases, including repairing obligations, granting approvals, setting budgets, managing accounts and major works, to name a few.
The Lease Advisory website (see Useful Links - Leaseholders) has exhaustive information available on who qualifies, things to consider and the required steps to Exercise your Right to Manage the Freehold of your building.
But before you do that, please give us a call or send an email, so we can have a chat and address the reasons why.
What kind of works?
Not all works need the permission of your freeholder. You need to check your lease, but in most cases works involving the structure of the building (moving or removing walls, digging basements and loft extensions) will require permission. Cosmetic works - general refurbishment, replacing kitchens & bathrooms and so forth - generally don't. If you're not sure though, please check.
If you need permission from your Freeholder ... You'll need a Licence for Alterations.
Please send us:
- A plan detailing the current layout;
- A plan detailing the proposed layout;
- A copy of your lease (if you have access to it) including the lease plan;
- A cheque payable to "Homemade Properties Limited" for £400 (+ VAT) to cover the costs of a Surveyor reviewing your proposals and advising the Freeholder.
If you already have them (they will generally be required for the Licence but not in the first instance for Freeholder's consent), please send the Planning Permissions (or application) where required, and Structural Engineers calculations, again if required.
If works have already been carried out, you'll need a Retrospective Licence for Alterations. You will need to submit all the above, and also the Building Completion Certificate and any other permissions you were required to obtain.
Please be aware though, if the works are not reasonable and/or have breached the Terms of your Lease, you may be required to reinstate the property to its original layout.
Can I put hardwood floors down?
In a word, if you have flats below you, no. The Freeholder will not give consent, and in many cases the Lease - between the Freeholder and Lessee - will include a clause specifically prohibiting hard wood floor. In addition, the lessee's right of the flat below to "Quiet and Peaceful Enjoyment" could be deemed to have been breached, should the Freeholder give consent.
We are aware of the many insulation layers on the market to prevent noise transmission, but we are neither hard wood flooring nor acoustic specialists, and will not take an opinion which could breach our contractual responsibilities.
You may need information from your Managing Agent before you can market your flat, and when you have a sale agreed your solicitor will need to complete Standard Pre-Contract Enquiries (SPCE), again which will probably need input from your Managing Agent.
If you're not sure who they are, use the Leaseholder page, but if can't find the details, give us a call.
If you are having trouble selling - maybe due to a short lease or otherwise - your freeholder may be interested in putting a lease extension offer forward for your consideration. Please give us a call or send an email, with your property details.
If you are a Leaseholder and wish to rent your flat out under an Assured Shorthold Tenancy (AST) - the most common but any sub-tenancy will probably require consent - you may need a "Licence to Sublet" from your Freeholder. This depends on your lease but most will contain a clause which requires consent from your freeholder "...not to be unreasonably withheld." If you have a Buy to Let Mortgage, many lenders require that you obtain freeholder's permission where required.
In most cases, obtaining Freeholder's permission within a week or two is not a problem and to accomodate this we will need the following:
- Full property address and the full name(s) of the leaseholder(s);
- Full name of your proposed tenant(s);
- A copy of the proposed tenancy agreement;
- A copy of your lease - if you have one available. We hold copies of most leases, but sometimes we have to apply to the Land Registry if we do not, or the copy we hold is too bad a quality to read properly. In this case it can delay the Licence being granted by a few weeks.
- A fee of £50 (+ VAT) - either by cheque to "Homemade Properties Limited" and sent to us, or please ask us for bank details for transfers. In rare cases our costs may be higher than this, however you will be told in advance if there is likely to be a higher fee.
If you have any queries, please call or email us.