What happens to leasehold property when you die?
If we are talking about what is known as a “long leasehold” flat or apartment (i.e. one that was granted for at least 21 years – as distinct from, say, a monthly tenancy), then on death the flat passes as part of the estate under the will of the deceased, and it’s possible for an executor to extend a lease in those circumstances.
NB It’s worth noting that there could be conditions on the lease with regard to ownership of the property. In particular there are an increasing number of retirement flats with conditions on who can and cannot own or even occupy the property. Retirement flats often have a minimum age requirement e.g. 55. If you inherit this type of retirement property and don’t fit the criteria, then you will need to sell the property to someone who does fit that criteria.
Can an Executor Extend a Lease?
Many executors are unaware of their rights to extend a leasehold on a residential flat or house, and the useful benefits this can bring. If leasehold residential property forms part of the estate in question, then, as long as the executor acts to start the application to extend the lease by serving the formal notice of claim within two years of probate being granted, they have the same rights as the living homeowner may have had. The deceased person has to have qualified for the lease extension themselves, which usually means having owned the property concerned for at least two years. And the formal, or statutory route to extend a lease is started by the issue of what is known as a section 42 notice, something that is usually done by solicitors with plenty of experience of lease extension – which is a niche area of law.
A similar right applies to executors wishing to buy the freehold of a leasehold house.
NB if the deceased person had not owned a flat for 2 years then there is no automatic right to a lease extension. In that case, however the executor may still be able to negotiate an informal agreement the freeholder.. This type of negotiation is not regulated, and so you cannot force the landlord into granting an extension. The best thing to do is talk it out and come to a mutually beneficial agreement.
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What Lease Extension Options Are Open to an Executor?
If these conditions are met, the executor has two options. They can either go straight ahead and extend the lease [possibly by making the most of using some of the cash in the estate to pay the freeholder’s premium, surveyors fees and both sets of legal costs], or start the process with the aim of putting the property on the market.
As long as the executor has started the process of extending the lease, this can then be handed onto the person who buys the house or flat. The new purchaser therefore doesn’t have to wait for the two years needed for him to start the lease extension and saves money too.
A property which already has a lease extension underway is worth more than one which does not, and it is more appealing to home buyers too.
What is the process if it is the freeholder who has died?
When a freeholder passes away, the person who is responsible for inheriting their estate, determined through a valid will or the rules of intestacy, will become the new freeholder. And it’s this new freeholder that the leaseholder will need to deal with in future to obtain buildings insurance details if they want to sell their property or extend their leasehold as well as purchase the freehold.
However, in cases where there are no next of kin then what is known as “bona vacantia” or “ownerless property” applies – this means that the freehold passes to the Crown. And it’s the Treasury Solicitor who is responsible for handling these kind of freehold on behalf of the Crown – and they are usually happy to give leaseholders an opportunity to purchase the freehold
Thinking of a Leasehold Extension? Contact our Experts
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