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DID YOU KNOW? A Leaseholder has a right to occupy premises for the term set out in the lease.


A Leaseholder has a right to occupy premises for the term set out in the lease. As the length of the lease decreases so does its value. It is, however, possible to extend the lease.

“Qualifying tenants/ qualifying leaseholders” have the right to request the Landlord/Freeholder (who is entitled to the property at the end of the term) to extend the lease by an additional 90 years. The conditions as to who is a “qualifying  tenant” is set out in the Leasehold Reform, Housing and Urban Development Act 1993.

How does a qualifying tenant extend the lease? They must serve a section 42 notice on the Landlord and pay the cost of the extension.

What does the extension of the lease cost? The calculation is set out in the Leasehold Reform, Housing and Urban Development Act 1993. If a lease is 80 years or less then the cost is even higher as the valuation includes an additional amount called the “marriage value” (this is not people being married but a valuation term).

What has the time for extending a lease got to do with people who are separating? The important point is that a qualifying tenant has to have been registered (at the Land Registry) as the legal owner of the property for two years. When tenants A&B own a property jointly (whether as joint tenants or tenants in common) they are regarded as THE qualifying tenant (they are not each a qualifying tenant they are together THE qualifying tenant).

If the flat is transferred from Tenant A to Tenant B, a Landlord could argue that the date when Tenant B became the qualifying tenant was when they were registered as the sole owner of the flat, rather than when they originally owned the flat jointly with tenant A. This would mean that the lease would be even shorter by the time they qualify to extend the lease and would therefore mean the lease was worth less and would cost more to extend. Although it is possible that a joint tenant could argue that the lease had been held on trust for both parties, it does complicate matters.

Tenants would particularly have to watch out if their lease was 82 years or less, so that they did not by accident prevent themselves extending the lease until it was shorter than 80 years thereby hugely increasing the cost of the extension.

It is important that people considering transferring their interest in a flat take specialist legal advice with respect to both the family side but also the valuation and leasehold side of their separation.

Just a small addition – if a tenant dies the 2 years ownership condition allows personal representatives of the tenant to keep the time qualification provided that any notice is served within 2 years of the tenant’s death.

 

Added: 08 Feb 2018 13:51


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