What do those freehold enfranchisement and lease extension terms mean?
Assignment: leases are assigned to the buyer of a leasehold property
Counter notice: having been served with a statutory notice by a leaseholder, a freeholder can issue a counter notice detailing their valuation of the premium. This must be submitted by a strict deadline and the help of a specialist solicitor is therefore required.
Determination: when a lease is prematurely brought to an end for a reason other than forfeiture, it is determined.
Enfranchisement: leaseholders with more than to years ownership behind them have a legal right (under certain circumstances) to buy the freehold from the freeholder in a process known as lease, collective (multiple leaseholders buying the freehold on a block of flats) or freehold enfranchisement or the ‘right to buy’. Once enfranchised, the lease is effectively ended and the purchaser becomes a full owner.
First Tier Property Tribunal (FTT): an FTT consists of a layman, a surveyor and a solicitor. This acts as an informal property court which can make judgments on disputes between freeholders and leaseholders which are binding on both sides. Often the First Tier Property Tribunal will be used to set a premium after disputes arise over the premium for lease extension
Forfeiture: if a leaseholder contravenes the terms of the lease, the freeholder can apply for a court order to forfeit the lease. This means that the lease is terminated before it has run down to zero years and the property goes back into the freeholder’s hands. There is no higher penalty for a leaseholder.
Freehold: a type of property ownership which is unrestricted and gives the owner a title which can be registered at the Land Registry. The title can be bought and sold.
Freeholder: someone who owns the freehold title.
Ground rent: this is a charge paid by the leaseholder to the freeholder annually. The amount of ground rent that is payable is detailed in the lease and may change at specified dates.
Head landlord: a leaseholder who gives a shorter lease to another leaseholder can become head landlord in a chain of leasehold ownership.
Informal lease extension: a lease extension that is done by agreement between a leaseholder and the freeholder without the formality of a section 42 notice being served
Lease extension: either through informal negotiations or the formal section 42 statutory lease extension process, a leaseholder can extend the length of their initial lease.
Leaseholder: Someone with ownership of a leasehold title.
Leasehold Valuation Tribunal (LVT): the old name for the the First Tier Property Tribunal – see above
Marriage value: this is an additional fee payable to the landlord when a lease with less than 80 years to run is extended. This is because extending the lease will make the property more valuable and the freeholder is entitled to half of this increased value. When the value of the property is combined (or married) with the extended lease, the value is higher than these things separately. The cost of extending a lease is therefore far higher when the lease is less than 80 years because this marriage value kicks in. Sometimes, landlords will try to stall lease extension proceedings so that the lease runs below 80 years and they entitled to an increased premium because of the marriage value.. This is a good example of why you will need specialist solicitors.
Participation agreement – a binding legal document committing leaseholders who wish to join in the enfranchisement process.
Click here to read more about Participation Agreements.
Peppercorn rent: a nominal rent which has the effect of keeping the lease alive. In reality, it means that the leaseholder has no zero ground rent to pay.
Premium: the price which the leaseholder must pay to the freeholder in order to extend a lease is known as the premium. The property value, remaining lease term and the terms of the lease itself are amongst the factors which are considered when setting the premium. Our solicitors always advise the appointment of specialist surveyor to calculate the premium.
Click here to read more about Enfranchisement Valuations
Reversion: leases which naturally run down to zero after 99 or 125 years automatically return to the ownership of the landlord.
Right of First Refusal: the right of leaseholders to be offered the chance to buy their freehold if the freeholder is looking to sell. Failure to offer the right of first refusal is a criminal offence.
Click here to read more about the Right of First Refusal.
Right to manage: the legal right for owners of residential long leasehold flats to jointly applied to take over the management of their block from their freeholder.
Click here to read more about the Right to Manage
Section 42 Notice: the formal application for leaseholders to their freeholder for a lease extension
Statutory lease extension: this is a right of those who have owned their leasehold property for two years. Such a leaseholder can compel the leaseholder to grant an extension of 90 years at peppercorn rent.
Click here to read more about Statutory lease extensions
Statutory notice: A leaseholder can serve this notice on a freeholder to start the statutory lease extension process. The regulations surrounding what must be included in this notice are strict so a specialist solicitor will need to draft the notice. Also known as a section 42 notice.
Title: the legal recognition of ownership which is recorded through registration with the Land Registry.
Vesting Orders; An Order from the County Court waiving the requirement for serving notice on the freeholder completely. Used when the freeholder is missing and cannot be tracked down. Allows for both lease extension and freehold purchase
Click here to read more about Vesting Orders
For advice from specialist Freehold Enfranchisement Solicitors – contact us now
Lease extension and lease enfranchisement involve a complex legal processes. That’s why it’s so important to instruct a specialist solicitor – one who really understands lease extension, right to manage and enfranchisement, with plenty of experience of and in these cases.
Our team have the expertise you need – lease extension and freehold enfranchisement is all they do. So contact us today today:
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