Hannah Faith, Leasehold Property Paralegal at Frettens, looks at the Informal Lease Extension route.
Hannah provides advice on contacting a freeholder, how to write an extension enquiry and what to look out for in the terms of extension.
Can I start a lease extension without a solicitor?
Yes! There is no harm in you approaching your freeholder initially without a lawyer’s assistance, to gauge their response and save yourself some money in these initial stages.
How to extend a lease - Your options
There are two routes to extend your lease; statutory or informal. You can read more about the difference between the two in our dedicated article, here.
The way in which your lease extension will proceed is dependent on how cooperative and reasonable your freeholder is. It is therefore usually worth approaching them to ask if they will agree an ‘informal’ lease extension (which is usually quicker and cheaper); unless you know that they will refuse, or will offer unfavourable terms.
Set out below is some useful information to help you contact your freeholder and to limit your legal fees as much as you can.
If your freeholder is not willing to grant an informal lease extension, then you can potentially use the ‘statutory’ route as your back-up plan.
How do I contact my freeholder?
Have a look at your most recent ground rent or service charge demand you have received, as this should provide you with contact details for the freeholder and/or their managing agents.
If a managing agent manages your building, then it might be sensible to contact them in the first instance.
Informal Lease Extension: What should I be cautious of?
If a freeholder is willing to grant an informal lease extension, they will likely require you to pay their fees up front in respect of calculating their ‘quote’ or obtaining valuation advice in order to calculate the appropriate ‘price’. This is quite usual and reasonable.
However it is important that, before you pay any money to your freeholder, you find out what terms they will be offering to you i.e. how many years and any variation to your ground rent or other terms in your existing lease.
Some freeholders will look to increase your ground rent or even include an ongoing-increasing ground rent which could cause you problems when you look to sell or re-mortgage your property in the future. You can read more about this in our article ‘Why are increased ground rents such an issue for leaseholders?’.
A peppercorn (zero) ground rent, or one that is fixed at a low level is most beneficial to you, as a leaseholder. In fact, freeholders will soon likely be legally obliged to reduce ground rents to zero in lease extensions anyway.
How to write an informal lease extension enquiry letter
We have created a template letter that you can send to your freeholder to enquire about an informal lease extension. Click this link to download the document, make sure to select 'Lease Extension' when inserting your details, then download the 'Informal Lease Extension Letter Template'.
Once downloaded, you just need to insert the relevant details and email/post it to your freeholder or their managing agents.
What do I need to look out for in a freeholder’s lease extension offer?
Firstly, check that their terms match what they suggested they would be proposing i.e. length of lease and ground rent etc.
Be aware that some freeholders may put a time limit on their offer i.e. it must be accepted and/or completed within a specific timeframe where-after, the premium would usually increase. Make sure you adhere to any timescale, otherwise your freeholder may insist that you pay for another valuation to be carried out so that they can issue a new offer.
What do I do next?
If you are happy with the terms and price proposed by your freeholder, you are best advised to instruct a specialist lawyer straight away to deal with the legalities of the transaction within the given timeframe. We would be delighted to assist in this respect.
However, if you are in any way unsure as to the price they have quoted, you may wish to seek your own, independent valuation advice, which we can arrange for you. This would establish whether or not the freeholder is quoting a fair price for your lease extension. It might be that the statutory route would be more beneficial than the terms and premium being offered to you informally, so it is always best to check.
Bright and accessible Lease Extension specialist solicitors
Our specialist Lease Extension Team is one of the largest in the region and are happy to discuss any of the issues outlined in this article.
If you have any questions, please call 01202 499255 and a member of the team will be happy to chat about your situation and your specific requirements.
We offer all new clients a free initial chat with one of our bright, knowledgeable lawyers.
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