Lease extension

[SOT3]

We purchased our property (a ground floor maisonette) around 6 years ago.

Our property is 'Share of Freehold' - and the property above is also 'Share of Freehold'.

When we purchased the property our lease was 999 years - but the property above only has a 71 year lease.

The owner of the property above has recently contacted us to say that she wants to extend her lease - we are not sure of the specific reason for this.

We have a fairly reasonable relationship with the owner of the property above - although they are an absentee landlord and we have never met them.

We have experienced quite a lot of issues with antisocial tennants - and leaks from above.

A family member mentioned that we should receive money from the owner of the property above if their lease is extended because it will increase the value of their property by approximately £100,000.

We are aware that there are some reforms happening to the current leasehold laws - and are quite confused about what will now be happening going forward (when people want to extend their lease on our situation).

Could you tell me if it is correct that we should receive money in this situation please?

Could you also advise me about how to calculate how much we should receive please?

Thank you for your help.

I think you need to get some legal advice because their extension means that the freeholders are losing the right to get the flat back in 71 years and that loss needs to be compensated. Don't sign anything and speak to a professional about how that loss should be calculate because you should be due a premium. That's my understanding of the situation at least.

so are you the only two freeholders?

Thank you very much Arlanymor.

Yes, it is just the two of us.

I think you do need to get advice as @Arlanymor says. Its different from the situation where the freeholder owns the whole of the freehold.

Thank you both very much for your help, I appreciate it.

No worries - hope it all goes smoothly (and you enjoy your unexpected windfall!)

You need a solicitor who is experienced in lease extensions. It is a complex area and complex calculation. Join the National Leasehold Campaign Facebook group. They are really good and very helpful.

I’m not sure why your relative thinks you’d receive money. We extended a lease from 80 years to 199 years and no money was paid to our co-freeholders.

I dont think this is right.

A leaseholder leases from the freeholder.

If you and property above share the freehold then you own and manage the building between you.

You need to clarify things with the owner of the property above. I think if they already own a share of the freehold they dont need to extend their lease.

I’m not sure why your relative thinks you’d receive money. We extended a lease from 80 years to 199 years and no money was paid to our co-freeholders.

They will want to extend the lease because it is getting too short to be mortgageable, which will cause problems (devaluation) if they want to sell.

It is up to the freeholders to grant an extension and it is the point of acquiring a freehold - it makes the leases ‘virtual freehold’ . It is unusual that one lease in the block has been extended and the other hasn’t but it can be done with the leaseholder paying just the necessary legal fees to extend. If you think you as a co-freeholder should be paid for the extension then you are going to be at a bit of an impasse and I think you would be unreasonable to expect this as you should both have effectively paid already for the lease extension at the point the freehold was acquired (whether this happened alongside the purchase of the leasehold property or not).

You need to get actual legal advice. There is no reason you shouldn't be paid for the lease extension. You are forfeiting your right to reversion of the flat at the end of the lease term by it being extended, and you should be compensated for that.

I don’t think you understand OP’s situation @LifeBeginsToday . She shouldn’t be paid for this.

I suspect what has happened is that OP bought the 999 yr leasehold flat with share of freehold attached and prior to that, the vendor and the other leaseholder acquired the freehold together and would have paid the same (or pro-rated total according to the floor area of each leasehold property). This confers the right for the freeholders to amend their lease - so the other leaseholder would have agreed for the vendor to extend their lease to 999 years prior to selling it to the OP (they would not have paid any extension fee to the other leaseholder for this).

The price paid for the OP’s flat would have reflected the value of the share of freehold and compensated the vendor for it. For some reason the other leaseholder hasn’t got around to extending their own lease so far, but whilst technically the OP is entitled to half of the value of a lease extension, IMO it would be totally unreasonable to demand this and I would expect to end up in a huge dispute with the neighbour over it.

The two maisonettes share the freehold so OP wouldn’t be paid.

Sounds like your lease was extended just before you bought if it’s 999 years. How bizarre that both leases weren’t extended at the same time. Might be worth checking with the previous owners (if you have their details) or your solicitor from the purchases what happened back then in case it was an oversight and/or how much they paid for the extension. If they only covered the legal fees, you will be come across as complete arses if you start demanding huge additional premiums from your neighbour on top of legal fees to extend their lease. Of course being complete arses isn’t illegal but it’s not great for neighbourly relations and as your co-freeholder you may need them to agree to something in the future which benefits you only and you risk them blocking it in retaliation.

I’m so glad you wrote this as it’s exactly what happened in my situation. My maisonette had an extended lease (just before I bought it) elderly neighbour downstairs didn’t extend as hers was owned by her stepson, when she went into care he extended by using a different solicitor to the one he was using for the sale. Very straightforward.

@HundredMilesAnHour if being a complete arse was illegal the prisons would be full 😂