Flat owners are becoming more and more aware of their right to extend their lease but there are still many flats on the market that are being sold with short leases (being those with less than 80 years). For the seller, selling a flat with a short lease will greatly reduce the pool of prospective buyers, potentially to just cash buyers. For the buyer, buying a flat with a short lease is likely to cause significant difficulties in obtaining a mortgage because the remaining term is simply not long enough to satisfy the lender's requirements. So what can we do about it? Most leaseholders are now aware that, provided that they have ownedthe flat for at least two years, they are entitled to a statutory lease extension of 90 years, and the reduction of the ground rent to a peppercorn. But what a lot of leaseholders and potential buyers of flats are not aware of is that a seller can commence the statutory lease extension process by serving a Section 42 Notice, and then assign the benefit of that Notice to the buyer. The advantages of using the assignment process are as follows: - Lease extension rights are immediately passed on to the buyer, meaning that they do not then have to wait 2 years before being able to extend the lease ; - The buyer benefits from a potentially lower premium for the lease extension, as the valuation date would be crystallised as at date of service of the Section 42 Notice; - If the lease is approaching 80 years, the buyer avoids the addition of marriage value to the premium, which would otherwise increase the premium; - If the lease extension terms cannot be agreed with the landlord, the rights to challenge that at the Tribunal also pass to the buyer; and - The seller has more of a market for the sale of the lease and need not undertake the entire lease extension process before having to market the flat for sale. While the process must be started by the seller, as the current owner of the flat, it is not unusual for the buyer or their solicitor to want to take the reins when it comes to preparing, serving and assigning a Section 42 Notice. This is because if the process is not carried out correctly, it is the buyer who stands to lose out; an incorrectly assigned Section 42 Notice will cease to have any effect, and the lease extension claim itself will fall away, leaving the buyer the owner of a short lease with no lease extension rights, and an agonising wait of two years before a new claim can be initiated. It is therefore vital that the assistance of a specialist Leasehold Enfranchisement solicitor is sought, alongside the assistance of your conveyancing solicitor. Leah Veasey, Associate at Birketts LLP
