Why now might be good time to extend your lease or claim your freehold
Hopefully you are locked down with sufficient supplies, but possibly a bit too much time on your hands. Perhaps turn a thought to whatever opportunities the pandemonium of the pandemic might gift.
Concerns about finances loom large in most of our minds. The media have reported a stark upturn in online gambling. Others are watching the stock market. A deep and prolonged recession is forecast the longer lockdown lasts.
If you are a leaseholder, there might well be more fruitful and positive diversions in store. Have a look at your lease. How many years are left? Just a few more than 80 or less than 80? In either case, there is probably no better time to extend. Your lease is a wasting asset, begging to be extended.
Couple that thought with the fact that the property market has pretty much ground to a halt. Government regulations have fettered the ability of estate agents to conduct viewings and removal firms to operate. The market is in lockdown. House moves are on hold. Few are viewing or offering. Borrowing opportunities have shrunk. But those downsides have shimmering upsides for leaseholders not looking to sell.
A property market in lockdown essentially means that there is no market and so virtually no transactions. The related effect on property prices is uncertainty and, if you believe the industry pundits, a drop of between 5% and 10% in house prices. The word out on our deserted streets is that by May 2021 we will see a recovery, with values rebounding between 3% and 6%, and so consistent with their pre-lockdown trajectory. The relatively finite timing of the crisis means that the decline will be limited.
Seize the moment and exercise the statutory right that you may well have to extend the lease of your flat by a further 90 years at a price that takes advantage of the current market freeze. Your ground rent, which might be modest or might be increasing at regular intervals, will be reduced to a nominal “peppercorn”.
You might consider getting together with your fellow leaseholders to claim the freehold of your building. Being in lockdown seems to be encouraging better neighbourly relations, presenting a perfect opportunity to maximise the value that each of you has in what may well be your most valuable asset.
If you have a leasehold house, there is no better time to claim the freehold. Your rent will be replaced with a peppercorn. You will be able to free yourself of covenants restricting you from altering the interior of your house without your landlord seeking extortionate payments. You might also be able to rid yourself of covenants restricting external alterations and use.
Lockdown does not present an obstacle in practical terms to proceeding. Your solicitor is locked down, ready to help. Land Registry documents are easily available online. No worry if you have lost your lease or mortgage documents. We live in a digital age.
Whilst a valuer would usually inspect, a physical inspection is not imperative for the purposes of making an opening proposal on price. It might be possible to arrange a virtual inspection. You could measure the rooms yourself and provide details of the accommodation to your valuer, to be verified by a later inspection before negotiations begin.
Perhaps you are concerned about funding. Stories abound about a stay on lending. But the perceived wisdom is that, once we are able to fling open our front doors again, the lending market will gear up pretty quickly and interest rates will be tantalisingly low. Loan to value ratios are rumoured to rise.
Extended leases and freehold claims will certainly take time. Tribunals have issued temporary guidelines that indicate a more drawn out process. That should be seen as a good thing, especially if you need to arrange funding, liquidate other assets or simply recover from the financial penalty of lockdown, or perhaps even save.
The key to unlocking your asset jangles in your favour alongside the valuation date, which is fixed at the date you put in your claim, regardless of how the market subsequently recovers. No time is locked down like the present. No benefit is unlocked by waiting until the pandemic has had its day.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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