A short guide to Enfranchisement and Lease Extension€¦ · A short guide to Enfranchisement and...

A short guide to Enfranchisement and Lease Extension

INTRODUCTION

7 THe COLLeCTIVe RIgHT TO eNFRANCHISe • WHATISIT?

• HOWDOIPREPAREFORACLAIM?

• HOWISACLAIMMADE?

• DISPUTES

• COMPLETION

12 THe INDIVIDUAL RIgHT TO eXTeND • WHATISIT?

• WHATDOIGET?

• THEPRICE

• HOWDOICLAIM?

• DISPUTES

• COMPLETION

15 ENFRANCHISEMENTOFHOUSES • WHATISTHERIGHT?

• HOWDOIQUALIFY?

• THEPRICE

• HOWDOICLAIM?

• DISPUTES

• COMPLETION

• THEEXTENDEDLEASEOPTION

CONTeNTS

enfranchisement 3

INTRODUCTION LEASEHOLDREFORMACT1967

LEASEHOLDREFORM,HOUSINGANDURBANDEVELOPMENTACT1993

The area of leasehold enfranchisement has attracted a plethora of media and academic interest since its formal introduction in 1967andhasbeenamendedandexpandedoverthepastfourdecades.Therightoflongleaseholderstobuytheirlandlord’sinterestoutrightoracquireanextendedleaseterm,isuniquetoEnglandandWalesand,perhapsunsurprisingly,hasledtoanumberoflegalchallengesovertheyears.Landlordsandtenantsalikeareanxioustoprotecttheirrespectivepropertyinterestsinamarketthatshowsnosignofabating.Consequently,thisareaofthelawiscontinuallyevolving.

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Ingeneralterms,thelegislationconferstwodistinctrights:topurchasethefreehold,eitherindividuallyinrelationtoleaseholdhouses,orcollectivelyforablockofflats,ortoseekaleaseextension.Althoughtheserightsarecurtailedbythestatutorytestsforqualification,changestothelegislation,introducedbytheCommonholdandLeaseholdReformAct2002,havemadeiteasierthaneverforleaseholderstomakeaclaim.

Therequirementthatleaseholdersmusthaveoccupiedthepropertyinquestionforaperiodoftwoyears(theso-calledresidencerequirement)haslargelybeensweptawayandreplacedbyanew,twoyearownershiptest.Indeed,inthecaseofacollectiveenfranchisement,eventheownershiprequirementhasbeenremoved.Likewise,qualificationtestsbasedontheproperty’srateablevaluesandrenthavegone,withtheresultthathighervaluehouses,forexample,maynowenfranchise.

Thepurposeofthisguideisnottogiveadefinitivestatementofthelawbuttoprovideanoverviewofthelegalrightsandobligationsthatthelawgrants.Asindicatedbelow,thelegislationiscomplexandlengthyanditisrecommendedthatprofessionaladviceisalwayssoughtbeforeaclaim is commenced.

WehopeyouenjoyreadingtheShortGuidetoEnfranchisementandLeaseExtensionandfindtheinformationhelpful.

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THe COLLeCTIVe RIgHT TO eNFRANCHISeLEASEHOLDREFORM, HOUSINg AND URBAN DEVELOPMENTACT1993

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WHATISIT?

Thisgivestherightfortenantsofflatsactingtogethertopurchasethefreeholdandanyheadleasesoftheirbuilding.Inorderforthebuilding toqualifyundertheAct,itmust:

•beanindependentbuildingorbeapartofabuilding whichiscapableofindependentdevelopment;and

•containtwoormoreflatsheldbyqualifyingtenants;and

•haveatleasttwothirdsoftheflatsheldbyqualifyingtenants.

Inordertobeaqualifyingtenantyoumusthavealongleasewhichmeansaleasewhich,whenoriginallygranted,wasforatermofmorethan21years.However,youmustnotownthreeormoreflatsinthebuilding.Youcannotbeaqualifyingtenantifyouholdabusinesslease.

Notwithstandingtheabove,thebuildingwillnotqualifyif:

•itcomprisesfourorlessunitsandhasa“residentfreeholder”;

•morethan25%oftheinternalfloorspace(excluding commonparts)isusedfornon-residentialpurposes;

•thebuildingispartofanoperationalrailway.

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HOWDOIPREPAREFORACLAIM?

Anyqualifyingtenantcangiveanoticetohislandlordorthemanagingagentrequiringdetailsofthevariouslegalinterestsintheblock.Thisnoticeplacesnocommitmentonthetenantbuttheresponsetothenoticeshouldprovidethetenantwiththeinformationnecessaryfor himtoascertainwhetherthebuildingcontainsasufficientnumber ofqualifyingtenantsforittoqualify.

Havingestablishedthatthebuildingqualifies,itisthenadvisabletoascertainwhetheryouhaveasufficientnumberoftenantswhowant toparticipate,bothforthepurposeofqualifyingforenfranchisement andforthepurposeofbeingabletofinancetheacquisition.Inorder toqualifyforenfranchisement,youneedtoestablishthatthenumber ofparticipatingtenantscomprisesnotlessthanonehalfofalltheflats inthebuilding.However,ifthereareonlytwoflatsinthebuildingthenbothmustparticipate.

Whenyouhaveestablishedthatthebuildingqualifiesandthatthereisasufficientnumberofqualifyingtenantswhowishtoparticipate,thentherearefivefurtherpracticalstepswhichshouldbetakenbeforeembarkingontheenfranchisementprocedure.

First,youneedtoestablishwhatitisgoingtocostbyobtainingavaluation.Insimpleterms,thepricetobepaidbytheparticipatingtenantstopurchasethefreeholdofthebuildingistheaggregateof:

•thebuilding’sinvestmentvaluetothefreeholder–thecapitalisedvalueofhisgroundrentsandthevalueofhisreversion(beingthepresentfreeholdvacantpossessionvaluedeferredfortheunexpiredtermof theleases);

•onehalfofthemarriagevalue–theincreasedvalueattributabletothefreeholdbyvirtueoftheparticipatingtenantsbeingabletograntthemselvesextendedleasesatnilpremiumandapeppercornrent; themarriagevalueattributabletoaleaseheldbyaparticipatingtenantwillbedeemedtobenilifthatleasehasanunexpiredtermofmorethan80yearsatthedatethattheinitialnoticeisgiven;

•compensationforlossinvalueofotherpropertyownedby thefreeholder,includingdevelopmentvalueconsequentto theseveranceofthebuildingfromthatotherproperty.

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Thevaluationdateisthedatethattheclaimnoticeisgiven.Value addedtotheflatofaparticipatingtenantbytenant’simprovements isdisregardedinthevaluation.

Forthepurposesofcalculatingprice,thetenantsshouldtaketheadviceofaproperlyqualifiedsurveyororvaluerwithexperienceinthefieldofenfranchisementandknowledgeofthemarket.

Inadditiontothepriceandtheparticipatingtenants’ownlegalcostsandvaluationfees,theclaimantswillberequiredtoreimbursethefreeholderhislegalcostsandvaluationfees.

Secondly,theparticipatorswillneedtoestablishhowtofinancethecostofacquisition.Itmay,forexample,benecessaryforanumberofparticipatingtenantstoseekafurtheradvancefromaBuildingSocietyorBank.Inparticular,theparticipatorswillwanttodecidewhoistofinancethepurchaseofthenon-participators’flatsandonwhatbasis.

Thirdly,itwillbenecessarytoestablishwhatvehicletheparticipatingtenantsshoulduseinordertobuythefreeholdandhowtheywillestablishandregulatetherelationshipbetweenthemselves.Inmostcases,thisislikelytobethroughacompanystructure,althoughin somecircumstancesatrustmightbemoreappropriate.Itshouldbe notedthattheparticipatingtenantsdonotallhavetohaveequalshares,sothattheproportionoftheshareholdingswillbeamatterfornegotiationbetweenthem.

The2002ActprovidesforcollectiveclaimstobemadethroughthemechanismofaRighttoEnfranchise(RTE)company.Howeverthoseprovisionshaveneverbeenbroughtintoforceanditisunlikelythat theywillbe.

Fourthly,theparticipatingtenantsshouldseekadvicetoestablish whethertherearetaximplicationstothetransaction,bothinrelation totheirindividualpositionsandinrelationtothevehiclechosento buythefreehold.

Finally,thecollectiveenfranchisementlegislationprovidesnoguidanceorcontrolsonthewayinwhichtheparticipatingtenantsshouldworktogetherinordertoacquirethefreehold.Sincethepurchasemaywellinvolvesubstantialsumsofmoneyandislikelytotaketimetocompleteand,duringthistime,theparticipatingtenantswillbeheavilyreliantoneachotherfortheperformanceoftaskswithinstrictlimits,itisstronglyadvisedthat,beforeembarkingonaclaim,theparticipatingtenantsshouldenterintoaformalagreement(calledaparticipationagreement)inordertoregulatetherelationshipbetweenthemduringthecourseofthe claim.

Enfranchisement9

HOWISTHECLAIMMADE?

Itisimportanttobeawarethatmostofthetimelimitsimposedontheprocedural stages of the claim are strict and a failure to do something withintherequiredtimeframecanhavedireconsequencesforthedefaulter.Itisthereforeessentialthat,bythetimeyoureachthenextstageoftheprocedure,youarewellorganisedandbackedbyexpertprofessionaladvice.

ThereasonforthisisthatthenextproceduralstepistheservicebytheparticipatingtenantsonthelandlordofwhattheActcallstheinitialnotice–thenoticewhichclaimstherighttocollectiveenfranchisement.Costsstarttorunagainstthetenantsfromthetimetheyservethe initial notice.

Amongstotherthingsthisnoticemustspecify:

•theextentofthepropertytobeacquired–supportedbyaplan;

•fullparticularsofallthequalifyingtenantsinthebuilding– notjusttheparticipatingtenants;

•thepricebeingofferedforthefreehold–theoffershouldbegenuine;

•thenameandaddressofthenomineepurchaser–thepersonorcompanynominatedbytheparticipatingtenantstoconductthenegotiationsandtobuythefreeholdontheirbehalf;

•thedatebywhichthefreeholdermustgivehiscounter-notice, beingadatenotlessthantwomonthsfromthedateoftheservice of the initial notice.

Thefreeholderislikelytorespondwithaproceduralnoticerequiringtheparticipatingtenantstodeducetitle.Thefreeholder’svaluerisalsolikelytoinspectthebuildingforthepurposeofcarryingoutavaluation.

Withintheperiodspecifiedintheinitialnotice,thefreeholdermustservehiscounter-notice.Firstandforemost,thismuststatewhetherornottheclaimisadmitted.Ifitisnot,thentheparticipatingtenantsmustdecide iftheywishtodisputetherejectionthroughthecourts.

Therearecircumstanceswherethefreeholdercanresistaclaim onthegroundofredevelopment.

Iftheclaimisadmitted,thenthecounter-noticemuststate,amongst otherthings:

•whichoftheproposalscontainedintheinitialnoticeareacceptable;

•whichoftheproposalscontainedintheinitialnoticearenotacceptableandwhatarethefreeholder’scounter-proposals–particularlyonprice;

•whetherthefreeholderwantsaleasebackonanyunitsinthebuildingnotheldbyaqualifyingtenant(forexample,aflatsubjecttoashorttermtenancyoracommercialunit).

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DISPUTeSIfanytermsofacquisition(includingtheprice)remainindisputeaftertwomonthsfollowingthedateofthecounter-notice,theneitherpartycanapplytotheleaseholdvaluationtribunalforthematterindispute tobedetermined.

Thisapplicationmustbemadewithinsixmonthsfollowingthedate ofthecounter-noticeortheclaimislost.

Mostclaimsaresettledbynegotiation.Ifaleaseholdvaluationtribunalisrequiredtomakeadetermination,thenthereisarighttoappealthatdecisiontotheLandsTribunalifpermissionisgiventodoso.

COMPLETION

Oncethetermsofacquisitionhavebeenagreedordeterminedbytheleaseholdvaluationtribunal,thenthematterrevertstoaconveyancingtransactionwiththepartiesenteringintoasalecontractonthetermsagreed or determined and thence to completion.

Ifthematterproceedstocompletion,thentheparticipatingtenants,throughtheirnomineepurchaser,willbecomethefreeholderofthebuilding,subjecttothevariousflatleases.Ineffect,theparticipatingtenantswillreplacetheexistingfreeholder.Thiswillputtheminapositiontograntthemselvesextendedleases.

Theremaybetaxationconsequencesongrantinganextendedlease,particularlyforsecondhomeowners.

Therewillalsoberesponsibilities.Theparticipatingtenantswillbecomeresponsibleforthemanagementofthebuildingandtheadministrationoftheservicechargeaccountinaccordancewiththecovenantsintheoriginal leases.

Ifthenomineepurchaserisacompany,allparticipatorswillbeshareholdersandsomewillbeofficersofthatcompany.

Theseareallmattersonwhichclearprofessionaladvicewillbeneeded.

Itisimportanttonotethatanindividualtenanthasnorighttobecomeaparticipatingtenant–evenifheisaqualifyingtenant.Itisamatterforthetenantstoresolvebetweenthemselves.Youcanalwaysasktobeallowedtojoinin,butyouwillhavenoremedyifrefused.Ifagroupdoesformwithoutyou–anddoesnotneedyou–youmaywellfindyourselfleft out.

However,ifyouareleftout,thatneednotnecessarilybetheendoftheroad.Thisisbecauseofthesecondmajorinnovationthatwasintroducedbythe1993Act–theindividualrighttoacquireanewlease.

enfranchisement 11

THe INDIVIDUAL RIgHT TO eXTeNDLEASEHOLDREFORM,HOUSINGANDURBANDEVELOPMENTACT1993

WHATISIT?

Theindividualrighttoastatutoryleaseextensionappliestoallqualifyingtenantsofflats.Theconditionisthatyoumustbethetenantofaflatwhichyouholdonalonglease(i.e.aleaseforanoriginalterminexcessof21years).Furthermore,youmusthaveownedtheleaseforatleasttwoyearsbeforethedateoftheclaim.Forthepurposeoftheleaseextension,thereisnolimittothenumberofflatsyoumayowninthebuildingandyoumayextendanyorallofthemprovidedthattheconditionsaremet.However,youcannotbeaqualifyingtenantifyouholdabusinesslease.

Priortothe2002Act,thepersonalrepresentativesofadeceasedtenanthadnorightstomakeaclaim,evenwherethedeceasedtenantwasabletofulfilthequalifyingconditions.However,suchpersonalrepresentativescannowmakeaclaimprovidedthattherightisexercisedwithin aperiodoftwoyearsfromthedateofgrantofprobate.

WHATDOIGET?

Ifyouqualify,thenyouwillbeentitledtoacquireanewextendedleaseinsubstitutionforyourexistinglease.Thisextendedleasewillbeforatermexpiring90yearsaftertheendofthecurrentleaseandwillreserve a peppercorn rent throughout the term.

Broadly,theleasewillotherwisebeonthesametermsastheexistingleasebutthelandlordwillhavecertainadditionalredevelopmentrights,exercisablewithin12monthsbeforetheexpirationofthecurrentleasetermandwithin5yearsbeforetheexpirationoftheextendedlease.

THe PRICeThepricetobepaidforthenewleasewillbetheaggregateof:

•thediminutioninvalueofthelandlord’sinterestintheflat,consequentonthegrantoftheextendedlease;beingthecapitalisedvalueof thelandlord’sgroundrentandthevalueofhisreversion(beingthepresentnear-freeholdvacantpossessionvaluedeferredforthe unexpiredleaseterm);

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•50%ofthemarriagevalue(theadditionalvaluereleasedbythetenant’sabilitytomergetheextendedleasewiththeexistinglease)mustbepaidtothelandlordalthoughthemarriagevaluewillbedeemedtobeniliftheexistingleasehasanunexpiredtermofmorethan80yearsatthedateoftheclaim;

•compensationforlossinvalueofotherpropertyownedbythefreeholder,includingdevelopmentvalue,consequentonthegrant ofthenewlease.

Thevaluationdateisthedateoftheclaimnotice.

Inadditiontothepriceandthetenant’sownlegalcostsandvaluationfees,youwillalsoberequiredtoreimbursethefreeholderhislegalcostsandvaluationfees.

HOWDOICLAIM?

Theproceduretobefollowedisverysimilartothatforcollectiveenfranchisement.Itisthereforeimportanttobeawarethatmostofthetime limits imposed on the procedural stages of the claim are strict and afailuretodosomethingwithintherequiredtimeframecanhavedireconsequences for the defaulter.

Thequalifyingtenantcanserveapreliminarynoticetoobtaininformation.Thereafter,heserveshisnoticeofclaim(inthiscasecalledthetenant’snoticeofclaim)whichamongstotherthingsneedstostate:

•adescriptionoftheflat–butnotnecessarilywithaplan;

•sufficientparticularstoestablishthattheleasequalifies;

•thepremiumbeingoffered–itmustbeabonafideoffer;

•thetermsofthenewlease;

•thedatebywhichthelandlordmustgivethecounter-notice, beingadatenotlessthantwomonthsfromthedateofservice ofthetenant’snotice.

Thelandlordislikelytorespondwithaproceduralnoticerequiringpaymentofadeposit(equalto10%ofthepremiumbeingoffered) andaskingthetenanttodeducetitle.Thelandlord’svaluerisalso likelytoinspecttheflatforthepurposeofcarryingoutavaluation.

Withintheperiodspecifiedinthetenant’snotice,thelandlordmustservehiscounter-notice.Firstandforemost,thismuststatewhetherornottheclaimisadmitted.Ifitisnot,thenthetenantmustdecideifhewishestodisputetherejectionthroughthecourts.However,unlikeacollectiveenfranchisementclaimwherethenomineepurchasermakestheapplicationtothecourtinthesecircumstances,inthecaseofthestatutoryleaseextension,itisthelandlordwhomakestheapplication if he has refused the claim.

enfranchisement 13

Therearecircumstanceswherethelandlordcanresistaclaimonthegroundofredevelopment.

Iftheclaimisadmitted,thenthecounter-noticemuststate,amongst otherthings:

•whichoftheproposalscontainedinthetenant’snoticeareacceptable;

•whichoftheproposalscontainedinthetenant’snoticearenotacceptableandwhatarethelandlord’scounter-proposals–particularlythe premium.

DISPUTeS

If either the terms of the lease or the premium remain in dispute after twomonthsfollowingthedateofthecounter-notice,theneitherpartycanapplytotheleaseholdvaluationtribunalforthematterindispute tobedetermined.

Thisapplicationmustbemadewithinsixmonthsfollowingthedate ofthecounter-noticeortheclaimislost.

Mostclaimsaresettledbynegotiation.Ifaleaseholdvaluationtribunalisrequiredtomakeadetermination,thenthereisarighttoappealthatdecisiontotheLandsTribunalifpermissionisgiventodoso.

COMPLETION

Oncethetermsoftheleaseandthepremiumhavebeenagreedordeterminedbytheleaseholdvaluationtribunal,thenthematterreverts toaconveyancingtransactionwiththepartiesproceedingtocompletionofthenewlease.

Thetenantcanwithdrawatanytimeandthereareprovisionsforthetenant’snoticetobeconsideredwithdrawnifcertainstricttimelimits arenotmetbythetenant.Asincollectiveenfranchisement,thetenantisonriskastocostsasfromthedateofhistenant’snoticesoitisessentialtobepreparedandtobeproperlyadvisedbeforestartingdowntheroadtoanextension.

Atenant’snoticeiscapableofbeingassignedbutonlyinconjunctionwithacontemporaneousassignmentofthelease.Itiscommonfor asellertoserveanoticeandthensellthatnoticewiththeleaseto apurchaser,whowilltakeovertheclaim.

Thereisnolimittothenumberoftimesthatatenantcanexercise thisright–solongasheispreparedtopaythecostsfordoingso.

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ENFRANCHISEMENTOF HOUSeSLEASEHOLDREFORMACT1967

WHATISTHERIGHT?

TheLeaseholdReformAct1967givesthetenantofaleaseholdhousewhofulfilscertainrulesofqualificationtherighttoacquirethefreeholdandanyintermediateleases.

HOWDOIQUALIFY?

Inlookingattherulesofqualificationunderthe1967Act,therearethreebasicquestionsthatneedtobeanswered.First,doesthebuildingqualify.Secondly,doestheleasequalify.Thirdly,doesthetenantqualify.

Inorderforthebuildingtoqualify,itmustbea‘house’.Thishasdevelopedawidedefinitionandcanmeanashopwithaflatabove, orabuildingconvertedtoflats.However,oneessentialfeatureisthattheremustbenomaterialoverorunder-hangwithanadjoiningbuilding(ifthereis,thenitislikelytobeaflat).

Theleasemustcomprisethewholeofthehouseanditmustbealongtenancy,i.e.,aleasewithanoriginaltermofmorethan21years.However,ifitisabusinesstenancy,thenitwillnotqualifyifitisfor anoriginaltermof35yearsorless.

Thetenantmusthaveownedtheleaseofthehouseforaperiodofatleasttwoyearsbeforethedateoftheclaim.Priortothe2002Act,itwasalsonecessaryforthetenanttooccupythehouseashisonlyormainresidenceforathreeyearperiod.Theresidencetesthasnowbeenabolishedsaveinlimitedcircumstances.

Ifahouseismixedusesothatthereisabusinesstenancy(forexample abuildingcomprisingashopwithaflatabove)orifthehouseincludesaflatwhichissubjecttoaqualifyingleaseunderthe1993Act(seeabove),thenthetenantisstillrequiredtofulfilaresidencetest.However,itismodifiedsothatthetenanthastooccupythehouseashisonlyormainresidenceonlyfortwoyearsorperiodsamountinginaggregatetotwoyearsintheprecedingtenyears.

enfranchisement 15

Priortothe2002Act,thepersonalrepresentativesofadeceasedtenanthadnorighttomakeaclaim,evenwherethedeceasedtenantwasable tofulfilthequalifyingconditions.However,suchpersonalrepresentativescannowmakeaclaimprovidedthattherightisexercisedwithinaperiodoftwoyearsfromthedateofgrantofprobate.

THe PRICe

The1967Acthasthreedifferentvaluationmethods.Ineverycase, thevaluationdateisthedateoftheclaim.

Ifthehousequalifiedpre-1993(i.e.bynotneedingtorelyonamendmentsmadetothefinanciallimitsand/orlowrentconditionsbyeitherthe1993Act,the1996Actorthe2002Act)andhadarateablevalueoflessthan£1,000(£500outsidetheGreaterLondonarea)on31March1990thenthevaluationisunderSection9(1).Thissectionexpresslyexcludesanymarriagevalueandrestrictsthevaluationtoaproportionofsitevalue.

Ifthehousequalifiedpre-1993butdidnothavearateablevalueoflessthan£1,000(£500outsidetheGreaterLondonarea)on31March1990,thevaluationisunderSection9(1A).Thevaluationelementshereare:

•thecapitalisedvalueofthelandlord’sgroundrentandthevalueofhisreversion(beingthepresentfreeholdvacantpossessionvaluedeferredfortheunexpiredleaseterm);and

•50%ofthemarriagevalue(theadditionalvaluereleasedbythetenant’sabilitytomergethefreeholdandleaseholdinterests)mustbepaidtothelandlordalthoughthemarriagevaluewillbedeemedtobeniliftheleasehasanunexpiredtermofmorethan80yearsatthedateoftheclaim.

Ifthehousequalifiespost-1993(i.e.theclaimantneedstorelyonamendmentsmadetothefinanciallimits/lowrentconditionsbyeitherthe1993Act,the1996Actorthe2002Act)thenthevaluationisunderSection9(1C).ThisisbroadlythesameasaSection9(1A)valuationexceptthefreeholdercanbecompensatedforlossinvalueofotherpropertyownedbyhim,includingdevelopmentvalue,consequent ontheseveranceofthehousefromtheotherproperty.

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HOWDOICLAIM?

Theprocedureforaclaimisrelativelystraightforward.Thetenant serveshisnoticeofclaim,whichisinprescribedformandneeds tostate(interalia):

•adescriptionofthehouse–butnotnecessarilywithaplan;

•particularstoestablishthattheleaseandtenantqualify;

•whatthetenantthinksisthebasisofvaluation.

Inadditiontothepriceandthetenant’sownlegalcostsandvaluationfees,hewillberequiredtoreimbursethefreeholderhislegalcostsandvaluationsfees.

Thelandlordislikelytorespondwithaproceduralnoticerequiringpaymentofadeposit(equaltothreetimestherentpayableunderthelease)andaskingthetenanttodeducetitleand(ifaresidencetestisrelevant)toproduceevidencebystatutorydeclarationthathefulfilstheresidence condition.

Thelandlord’svaluerisalsolikelytoinspectthehouseforthepurpose ofcarryingoutavaluation.

TheActrequiresthelandlordtostate,withintwomonthsofthenoticeofclaimbeingserved,whetherornotheadmitstheclaim.Iftheclaimisnotadmittedthenthetenantmustdecideifhewishestodisputetherejectionthroughthecourts.

Afreeholdercannotresistaclaimonredevelopmentgrounds.

DISPUTeS

Iftheclaimisadmittedandeitherthetermsoftheconveyanceorthepriceremainindisputeaftertwomonthsfollowingthedateofthenoticeofclaim,theneitherpartycanapplytotheleaseholdvaluationtribunalforthematterindisputetobedetermined.Therearenotimelimitsonthemaking of this application.

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COMPLETION

Oncethetermsoftheconveyanceandthepurchasepricehavebeenagreedordeterminedbytheleaseholdvaluationtribunal,thematterrevertstoaconveyancingtransactionwiththepartiesproceeding to completion.

Thetenantcanwithdrawatanytimeuptoonemonthfollowingthedeterminationofthepurchaseprice.Unlikecollectiveenfranchisementandstatutoryleaseextensionclaims,therearenostrictproceduraltimelimits.However,thetenantisliableforthelandlord’scostsasfromthedate of his notice of claim.

THe eXTeNDeD LeASe OPTION

The1967Actalsoallowsthequalifyingtenantofahousetotakeanextendedleaseofthehouseforatermof50yearstoexpireafterthetermdateoftheexistingleaseatamoderngroundrentthroughouttheextendedtermandwithoutpaymentofapremium.Thisrighthasbeenlittleexercisedinrecentyearsnotleastbecausenoneoftheamendmentsrelatingtotheabolitionoffinanciallimitsandthelowrenttestintroducedbythe1993Act,the1996Actandthe2002Actapplytoit.Furthermore,theextendedleaseoriginallyhadnostatutoryprotectionand carried no right to acquire the freehold.

However,followingthe2002Act,alltenanciesextendedunderthe 1967Actnowhavesecurityoftenure.Furthermore,thetenantunder anextendedleasenowhastherighttoacquirethefreehold,ifheotherwisefulfilsthequalifyingconditions;insuchcases,thepurchasepricewillbedeterminedinaccordancewithsection9(1C)butwithmodifiedassumptions.

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Thisguideisageneralstatementofthelawasat1September2007.Eachclaimneedstobeconsideredinlightofitsownfacts.Itisrecommendedthereforethatspecificadviceshouldalwaysbeobtainedontheparticularfacts of each case.

ABOUTPEMBERTONGREENISHPembertonGreenishisaspecialistfirmrenownedforitspropertyandprivateclientwork.Itscorebusinessremainsprovidinglegalservicestocompaniesandindividualsowninganddealinginpropertywithafocusonfamilyandcharityownedestates.PembertonGreenishalsooffersservicestoprivateclientsinareasofUKandinternationaltaxplanning,trusts,willsandtheoperationofUKandoffshoreinvestmentvehicles.

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Enfranchisement19

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