Do executors have the right to apply for a statutory lease extension?
Yes – and this can prove very useful. Provided that they do so within two years of the date of grant of probate, the executors can apply to extend the lease on a residential leasehold flat or house by serving a formal notice of claim.
The only limitation is that the deceased must have qualified for that lease extension themselves – including having owned the property themselves for a period of at least two years.
As a result, an executor can either go ahead with extending the lease themselves, or can put a property on the market with the benefit of the notice of claim, which can then be assigned onto the purchaser – so the new purchaser immediately has the right to a leasehold extension upon completion of the sale without having to wait two years, and the vendors do not have to go through the expense of paying to extend the lease themselves.
What is an informal lease extension?
It’s also worth noting that although to qualify for a statutory or formal lease extension, certain conditions need to have been met by the deceased (and by applying for a statutory lease extension, the freeholder cannot refuse a 90 year lease extension at a reasonable price), there is always the possibility of a an informal or voluntary lease extension – which can simply be negotiated with the freeholder.
I am an executor – why might I want a lease extension?
An executor’s duty is of course to collect in and distribute the deceased’s estate. But if the estate includes a flat (or more unusually a leasehold house) with a short lease, then arranging for a lease extension should increase the value of the flat – and thus the value of the estate – not to mention the marketability of the property in question.
And how short is a short lease? Anything below 70 years gets increasingly hard to sell – not least because these days many mortgage companies simply won’t loan against a flat with a lease term that low. And a lot of purchasers aren’t keen on flats with less than 80 years left to run.
And that 80 year point is important. Why? That’s because the very moment that the remaining term drops below 80 years, the price of the lease extension goes up. So again if the remaining lease term is approaching 80 years – that’s another good reason to extend the lease , to avoid an increased premium payable to the freeholder t.
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