Solicitors Who Extend Leases – The Alternatives
If you're thinking of a lease extension but wondering if there are any other ways in which you can increase the control you have over your home, you need to be aware of both leasehold enfranchisement and the right to manage.
Leasehold Enfranchisement
Lease enfranchisement is an alternative to extending your lease, but it's not for the squeamish. This is effectively the only way you can really own your own home but the actual process of enfranchisement involves the need for a huge degree of cooperation with some or all of other flat owners in your block. It is more effective than a lease extension but, in reality, some people find getting that degree of cooperation very difficult indeed – so do be warned.
The Leasehold Reform Act 1993 created the right for a group of qualifying leaseholders to compel the landlord to sell the freehold interest to them.
To qualify for this right the leaseholders must satisfy the following criteria:
This differs to a leasehold extension in that when the leaseholders exercise their right of enfranchisement, they actually become the landlord as well as the tenant. This gives them the ability to grant themselves a new 999 year lease.
Leasehold enfranchisement provides an effective alternative to extending a lease in that it will help make your property more appealing to purchasers and may secure you a re-mortgage opportunity. It is a sensible option if you can manage the tricky task of both convincing enough other qualifying tenants in your block to share your objectives and keeping them on board throughout the enfranchisement process itself.
The cost of leasehold enfranchisement normally involves:
Getting a specialist surveyor’s enfranchisement valuation;
Paying for the landlord’s reasonable costs (including legal fees);
The costs of taking the claim before a Leasehold Valuation Tribunal (when necessary).
The costs involved in managing the freehold building itself (i.e. if done collectively, you may wish to appoint a management company)
Right to Manage
The right to manage was created by the Leasehold and Commonhold Reform Act 2002 and provides that qualifying leaseholds have the right to compel their landlord to hand over the management of their freehold building to them. After exercising the right, the leaseholders no longer have to deal with the landlord or the existing management company (or indeed any management companies) if they want to do something with the building.
The right to manage can only be exercised if 50% of the ‘qualifying tenants’ in the building wish to do so. Not only this, but the floor space of the building cannot be used for any more than 25% of a non-residential purpose. So, for example, if you live in a two storey building, with the whole ground floor being used as a shop, you will not be eligible for the right to manage. To be a qualifying tenant, the following criteria must be established:
Your lease must have originally been granted for a period of 21 years or more;
The lease cannot be non-residential nor can it be granted by a Charitable Housing Trust; and
2/3rds of the building must be occupied by qualifying tenants.
Normally the leaseholders exercising this right will set up a right to manage company, run by the leaseholders as directors. This company then becomes the legal entity dealing with the management of the freehold building.
The process involved in taking over the right to manage differs from extending leases in that the period of the tenant’s lease is not actually lengthened; rather the right to manage affects the rights of the tenants during their current lease.
The right to manage provides an effective alternative to extending your lease if you are happy with the length of that lease, yet wish to increase the value of your property by better management of the block or save yourself some money in management fees.
The cost of exercising the right to manage will normally involve paying:
Can I buy a part of the freehold interest instead of extending my lease?
Other than collective enfranchisement, there is no legal method of buying a section of a freehold. Sometimes a landlord will offer to sell a section of the freehold interest along with a leasehold extension. In these cases it is likely that the landlord will expect to take an additional fee for this.
Unsure if lease extension is the right option? Talk to our solicitors today
Wherever you live, for clear and practical legal advice about lease extensions and the alternatives, contact us today.