With a leasehold property, you only own it for a set period (as set out in the lease). Leasehold Enfranchisement is the process you go through to either extend your lease, or purchase a share of the freehold (collective enfranchisement).
When you buy a leasehold property, you enter a legal agreement with the landlord known as a lease. New leases tend to be long-term – generally lasting over 99 years.
Either way, you will have to pay a premium for extending the leasehold – that is why it is important to find a competent surveyor to do a valuation and help you decide a “realistic” price to pay to extend your lease. Ideally, this is done before you commence negotiations with the landlord. How much you pay depends on a number of factors including:
- The value of the property
- The number of years left on the lease
- The annual ground rent
Leaseholds can be bought and sold when they have years unexpired. When your lease has between 85-90 years left, you should start thinking about a lease extension, as generally, the shorter the lease, the less it is worth. The value of short leases can drop rapidly. When the lease falls below 80 years, it will cost more to extend as “marriage value” is included in the formula used to calculate the premium to be paid for the lease extension.
Under the Leasehold Reform, Housing and Urban Development Act 1993, the government has been giving leaseholders protection against short leases, by giving the right to extend their lease or the right to buy the property.
See also “The Leasehold Advisory Service” for more information. This is a Government funded, independent advice service for residential leaseholders – www.lease-advice.org.
For a no-nonsense discussion about the best options for the property you are looking at call us on 07836 216517 or fill out our form on the contact us page.