Question: I own a leasehold flat and live there with my girlfriend and two dogs. I am told I need to have the lease renewed in order to add value to my property, and that I can do so under the Leasehold Reform Act. A colleague has also told me that the value of the lease diminishes as the term becomes shorter. Is this true? Can you please explain what the Act means — and exactly what I need to do to renew the lease?
Answer: The value of a long lease granted at a premium reduces as the remaining number of years — known as the “term” — shortens. If the term drops below 70 years the flat will become difficult to mortgage.
The Leasehold Reform, Housing and Urban Development Act 1993 gives qualifying tenants the right to acquire, in return for a one-off sum or “premium”, a new lease of 90 years plus the unexpired term at a peppercorn rent.
You may qualify if you have owned your flat for more than two years. You do not have to live there. The process is started by you serving notice on the landlord and then it follows a prescribed route.
The premium is calculated according to a formula that takes into account the number of years left on the lease. An additional element called “marriage value” is payable if the lease has dropped below 80 years.
You will incur fees for appointing a surveyor to advise you on the premium and for a solicitor to deal with the paperwork.
You will also be responsible for the landlord’s reasonable legal and valuation fees.
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If you have a question for Fiona McNulty, please email email@example.com or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona is legal director in the real estate group of Foot Anstey LLP in Exeter.
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.