Sussex Lease Extensions Blog

Buy the Freehold: Choosing the Nominee Purchaser

Posted on 28/05/13, filed under Fresh News

So you and your fellow tenants have decided to apply to buy the freehold to your blocks of flats. You have checked you’re eligible and there are enough qualifying tenants to proceed with the purchase of the freehold. The next step is to choose the nominee purchaser, who has to be named in the formal notice but what does this mean?

What is a Nominee Purchaser?
A nominee purchaser will act as the main person and point of contact in the freehold purchase process and will be named as the purchaser in the Initial Notice served on the current freeholder. They will need to be named as early in the process as possible, and most definitely must be set up or agreed upon before proceedings commence. On completion of the purchase of the freehold they will be responsible for the management of the building. If purchasing the freehold of a block of flats with a block with fewer than three leaseholders, then they will not need to choose a nominee purchaser, but larger blocks with four or more leaseholders must ensure a nominee purchaser is chosen as early in the process as possible.

There are no legal stipulations stating what or who is the nominee purchaser, so leaseholders are free to decide how they set this up.

The nominee purchaser could be:  
  •  One of the leaseholders
  •  A corporate person
  •  A trust
  •  A company formed by the leaseholders

According to the Law of Property Act 1925 no more than four people can be listed as owners for one property. In the case of larger blocks applying to buy the freehold tenants in most cases prefer to form a corporate body, allowing multiple people to be involved with the process and future management of the building.

If you do decide to form a company seek professional guidance from a solicitor, managing agent or accountant, who will be able to advise tenants on establishing a company. Ensuring the Initial Notice and nominee purchaser are correctly set up will save both time and money. A specialist enfranchisement solicitor will be able to help set this up correctly in order to avoid the Initial Notice being rejected.

Lease Extensions: Solicitor or Valuation Surveyor?

Posted on 05/04/13, filed under Fresh News

Many leaseholders are confused as to who they need to contact to organise a lease extension or the purchase of a freehold of a block of flats (Enfranchise) on their behalf. Should it be a specialist Valuation Surveyor or a Specialist Solicitor? The answer is actually both. Usually the valuation surveyor is the first to be appointed.

To obtain a statutory lease extension or to enfranchise the freehold, a specialist valuation surveyor is initially required to inspect the property and leases, advising upon the premium valuation and the valuation figure to be inserted in the formal notice. A specialist lease extensions solicitor is then required to serve the formal notice, they will receive and check the counter notice when it is received from the freeholder. It is then referred back to the lease extension Valuation Surveyor to negotiate terms with the freeholders valuer. If successful the valuation surveyor will report the terms to the Solicitor who’ll complete the legal formalities of the new lease or transfer of the freehold including registering with the land registry. If matters cannot be agreed, then the solicitor will make an application to the Leasehold Valuation Tribunal for determination and if the disputed matters are purely in respect of the valuation then the valuation surveyor will attend the tribunal hearing and if purely legal items the solicitor will attend the hearing on the clients behalf. In some cases where both legal and valuation matters are outstanding, both professionals will attend.

The process involves a high degree of cooperation and consultation between the two professionals and it is beneficial to instruct professionals who regularly work together as a team.

Lease Extensions: Should I Buy a Flat with a Short Lease?

Posted on 18/03/13, filed under Fresh News

There’s so much to consider when buying property and top of the list of priorities when buying a flat should be the length of the unexpired lease term. Ideally it should be in excess of 85 years. As the lease shortens, future value and saleability will be affected – so the longer the unexpired term the better.

So should you buy a flat with a short lease?

Before buying any property with a short unexpired lease term take the time to calculate the likely cost of applying for a lease extension against the price of the property itself. The low price of a flat with a shorter lease doesn’t always balance out the cost of applying for a lease extension. The cost of fees for extending a lease should also be taken into consideration.

The price of extending a lease below 80 years increases considerably, which effects resale value and general saleability. Short leases will also have an effect on mortgage ability with many lenders demanding minimum unexpired terms of 70 or 75 years, affecting leaseholder’s remortgaging as well as buyers. Usually a mortgage lender will ask for a lease extension to be completed prior to advancing funds.

Legislation means a leaseholder has to have owned a property for 2 years to be entitled to a statutory lease extension, making it difficult for new buyers. But the existing leaseholder can commence formal proceedings on your behalf, serving the initial notice on the freeholder and then assigning this to you as part of the sale. This allows a purchaser to avoid the 2 year ownership requirement.

Buyers should also beware of sellers obtaining short back to 99 year lease extensions by agreement with the freeholder simply obtained in order to sell. Often in an attempt to keep their capital cost low, outgoing leaseholders agree to excessive annual ground rents and regular increases which the purchaser becomes liable for.

Before purchasing a short lease flat seek appropriate professional advice so that the pitfalls and problems are fully explained and understood, and the price paid reflects the actual lease details.