If you want to know about how to extend your lease, that is quite important to understand the terminology – so here is a list of some of the most common expressions used in relation to lease extension – and an explanation of exactly what they mean.
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Assignment: the act of granting a lease to the purchaser of a leasehold property.
Counter notice: a freeholder can serve a leaseholder with a counter notice if they are served with a statutory notice by the leaseholder. The counter notice should detail the freeholder’s valuation of the premium. Strict time limits apply so a specialist solicitor will be needed to get this done correctly and on time.
Determination: if a lease ends without simply running down it is determined e.g. the freeholder buys the lease back.
Enfranchisement: this is the process by which leaseholders (in the case of a block of flats) or a leaseholder (in the case of a house) purchases the freehold, thereby acquiring full ownership of the property rather than leasehold. This is often referred to as ‘right to buy’, ‘collective/freehold or leasehold enfranchisement’ or ‘freehold purchase’. Under certain circumstances leaseholders will have the right to compel freeholders to sell the freehold.
The First Tier Property Tribunal: a panel of three formed of a solicitor, a surveyor and a layman, which act as an informal court set up to resolve specified property disputes. These are often used to settle disputes where a premium for lease extension cannot be agreed between leaseholder and freeholder. The Tribunal can set a premium and its findings bind both parties (although appeals can be made).
Forfeiture: the court can terminate a lease before the end of the specified term if the leaseholder is found to have breached the terms of the lease. This is known as forfeiture and it is the most serious means of sanctioning the leaseholder. Landlords must seek a court order for this.
Click here to read more about forfeiture and possession.
Freehold: an unlimited form of ownership. Whoever owns the freehold title will be registered with the Land Registry and this title can be bought and sold.
Freeholder: the person with ownership of the freehold title.
Ground rent: this is a fee which the leaseholder must pay to the freeholder each year. How much is to be paid will be detailed in the lease but could be subject to change at set intervals. Click here to read about ground rent arrears.
Head Landlord: this is a leaseholder who gives another person a lease slightly shorter than his own lease which was granted by the leaseholder. A chain of leaseholders is therefore created.
Lease Extension: the process of lengthening the original terms of the lease. Leaseholders and freeholders can either arrange this informally, or the freeholder can be forced to extend a lease by going through the statutory process [see below].
Lease Extension Valuation: the process of setting a premium payable to the freeholder by a leaseholder upon extending the lease. Click here to read more about lease extension valuations
Leaseholder: the person with ownership of the leasehold title.
Leasehold Valuation Tribunal (or LVT): now renamed The First Tier Property Tribunal
Marriage Value: if a lease runs below 80 years, when it comes to extend a lease, the leaseholder must pay an additional fee to the freeholder known as the Marriage Value. This is because a lease extension will add value to the property and the landlord has a right to 50% of this extra value. It is called a marriage value because when the property value and the longer lease are combined the value is greater than the two as by themselves. It is therefore important to extend the lease before the lease runs down to 80 years. Some landlords will attempt to delay lease extension proceedings so that the lease will run below this mark and they can then charge a marriage fee.
Click here to read more about lease extension marriage value
Peppercorn rent: this is a very small or nominal payment which is used to satisfy a contract as in ‘peppercorn rent’.
Premium: this is the fee paid to the freeholder in order to extend a lease of buy the freehold. Surveyors will set this premium taking the terms of the lease and the value of the property into account.
Reversion: property goes back into the hands of the landlord when a lease runs down from its 99 or 125 year term.
Statutory lease extension: an extension given because of the right of the leaseholder to an extension having lived in the property for two years. This right enables eligible leaseholders to demand a leasehold extension from the freeholder. This extension of the lease will be for 90 years at a peppercorn rent.
Statutory notice: this formally details the demand for a statutory lease extension and a proposed premium and is served upon the freeholder by the leaseholder. Once registered with the Land Registry the benefit can be sold with the leasehold title and whoever buys it can continue the lease extension process. A specialist lease extension solicitor will be needed to draw up the notice because of the complicated requirements involved.
Title: this is a clearly stated form of property ownership which is formally registered.
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Whether you are a leaseholder or a freeholder, if you are involved in UK lease extension or enfranchisement proceedings, you will need a specialist solicitor on your side. Our lease extension solicitors have the experience and specialist knowledge you need, so:
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