What is the basis of the valuation?
This forms three parts:
Diminution in the value of the Freeholder's Interest : This is what the freeholder is losing – essentially it is the capitalisation of the ground rent and the reversion.
Marriage value :
This is the value created by merging the existing leasehold interest with the new extended leasehold interest.
Compensation:
Compensation is payable to the freeholder if he sustains loss to any other property owned from the granting of the new lease. This category is extremely rare.
Do you qualify?
The 2024 Leasehold and Freehold Reform Act has removed the two-year rule, so now, as long as the property is in your name, you qualify to extend your lease. The extension adds 90 years to the existing unexpired term, with the ground rent reduced to zero.
What is the procedure under the legislation?
Your solicitor will serve a Section 42 Initial Notice served on the freeholder stating what the flat comprises, details of the lease and the price offered for the premium.
Within two months the freeholder is required to serve a Counter Notice acknowledging the lessee's right to a lease extension. Normally the freeholder, in his Counter Notice, will not agree to the figure that has been offered so negotiations then take place.
Hopefully a price can be agreed, but if not (which is rare), the lessee has six months from the date of the Counter-notice within which they can apply to the First Tier Tribunal (Property Chamber) who will determine the price to be paid.
Will I be able to sell my flat with a low lease?
Yes, you can. However, it will likely narrow down the market to cash purchasers who will want a significant discount on the price of the flat.
Key Benefits
An extended lease can help restore your property's full market appeal, opening it to a wider range of purchasers, including buyers who may require mortgage finance.