Freeholder consent to extension

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    Freeholder consent to extension

    We are thinking of doing a rear and/or side extension as we need some extra space and I was looking for some advice to clarify our thoughts on how to approach the approval process. I have read through quite a few helpful posts on this forum which answered quite a few of my original queries. Apologies for the length of the post below! Would greatly appreciate any thoughts, pros/cons and any other issues I might have missed.

    Current situation:
    Ours is a ground floor leasehold flat in a semi-detached building.
    There are 5 leasehold flats in total including one in a roof conversion - one flat on each floor.
    The semi-detached on the other side is similarly setup, but ground floor split into 2 flats.
    We are about to send the initial notice to the freeholder to start the collective enfranchisement process. (freehold has been professionally valued and solicitors appointed)

    Lease:
    The rear garden is demised exclusively to our flat in our lease.
    The lease requires freeholder consent for any non-structural work, but unhelpfully does not have the ‘will not be unreasonable withheld’ bit. The lease in a different place does refer to any license/consents costs that we need to pay the freeholder for. I have included the relevant extracts from the lease further below. I read this to mean that we will need consent for any extension, which could be withheld and we might need to pay a premium to the leaseholder - in addition to all of the freeholders costs (valuation, legal fees, lease variations fees for all other leaseholders?)

    Potential premium:
    We don’t mind paying a premium if it is reasonably due, but the freehold valuation surveyor has not included any development value in the freehold valuation. Estate agents locally have confirmed that in the current market, an extension will not really add any value to the property over the cost incurred to build it.
    1. Am I right in thinking that any premium due is usually 50% of profit after costs to extend, rather than 50% of uplift in value of property without costs?
    2. If so, are costs of legal/surveyor fees included as well, or just the actual build costs?

    Course of action:
    As we are about to undertake the freehold enfranchisement process, I do not wish to muddy the waters with this parallel conversation yet. Below are three options I can think of. All options relate to freeholder consent only - subject to applying for and receiving planning permission and knowing that we will need to pay freeholder’s costs.

    Option 1: Complete collective enfranchisement process to buy freehold and ask for approval from the new company holding the freehold.
    Pros
    • If there is any development value, this would come out in freehold value negotiations and we pay for it. Would other leaseholders rely on that to accept no value left to chase there?
    • Opportunity to vary leases to include ‘‘will not be unreasonable withheld’’ making process smoother?

    Cons
    • Co-ordinate with 4 new freeholders with no experience in this for arranging legal advice / structural surveyors, which could drag the process out v/s; dealing with current freeholder’s agent who knows more about the process and has probably done this before.
    • Delay of potentially a year from now to even start the consent process.

    Option 2: Ask for freeholder consent now during the enfranchisement process.
    Pros
    • Gets the issue out in the open and no delays in waiting for other leaseholders to understand the process and respond.
    Cons
    • Opportunity for freeholder to be difficult in their freehold value negotiations.
    • Probably most expensive outcome from the three options

    Option 3: Ask for freeholder consent after the freehold value has been agreed as part of enfranchisement process, but before it is transferred to the freehold company.
    Pros
    • If there is any development value, this would come out in freehold value negotiations. If it transpired that we had to pay for any development value on our flat, could it be conditional on grant of consent at the same time?
    • Less requirement for input from other leaseholders and consent already in place when freehold is taken over by the new company.
    • I understand it is fairly common to grant new 999 year leases when freehold is taken over by the new company. Potential savings on lease variation costs to reflect new footprint of the building if undertaken at the same time as the other enfranchisement paperwork?
    • Planning approvals and party wall matters can be started while freehold process is still being concluded.

    Cons
    • Can’t think of any - so too good to be true!?

    Planning Chicken or Egg:
    At what point in the process should we be engaging with architects etc to get plans drawn up? Of course it would be ideal to have detailed structural drawings available right at the outset, but no point in spending the money if cost of consent ends up beings prohibitive. At the same time appreciate that some steps probably cannot take place without full drawings being in place. Can consent be granted without drawings - subject to conditions such as planning permission, structural surveyor involvement, insured bulder, etc?

    Bonus Party wall question:
    Will we need to serve notices on all of the other leaseholders in our building and all flats in the adjacent building? Or just the ones we share common walls with i.e. flats directly above us and to the side?

    A question I already know the answer to:
    Why have we not approached the freeholder already? They have a history of being unreasonable. Most recently when we approached them to buy the freehold, but they wanted more than 10 times what we were expecting. Our view was subsequently confirmed by the valuation surveyor.

    Lease extracts:

    3.5 LEGAL AND SURVEYORS' COSTS
    To pay all legal costs expenses and disbursements and surveyor's fees incurred by the Landlord in connection with or resulting from any application by the Tenant for any licence or consent of the Landlord or any other matter including such costs expenses disbursements and fees as shall have accrued when any licence consent or other matter is reasonably refused or any application is withdrawn save where such licence or consent is unlawfully withheld by the Landlord or issued subject to unlawful conditions.

    3.9 NOT TO MAKE ALTERATIONS
    Not at any time during the term to cut or injure or permit to be cut or injured any of the floors walls timbers or roof of the Demised Premises and not to alter or permit to be altered the height or elevation of the-Demised Premises or the external appearance thereof and not at any time during the Term to fix or permit to be fixed any projecting flue pipe fan or ventilator on or through the external face of the walls or windows of the Demised Premises PROVIDED THAT the Tenant may carry out internal non­structural alterations without the previous consent in writing of the Landlord so long
    as -…

    A special thanks:
    To all those who have patiently read through my thousand word essay above!

    #2
    Dear GreenClock

    I believe as a Section 13 Notice was served the freeholder will not be able to grant any new leases or variations to leases. See Section 19 of the 1993 Act (Leasehold Reform, Housing and Urban Development Act 1993). Therefore, you will need to wait to obtain permission from the RTE company.

    With regard to consent as your lease addresses consent Statute dictates 'consent cannot be unreasonably withheld'.

    You might like to start a conversation with the participating tenants and non-participating tenants, if any, to find out their view of your plans. If they are positive it is likely negotiations with them will be cheaper than permission from your freeholder anyway.

    Comment


      #3
      Many thanks vmart. The s13 Notice has not gone in yet, but will be imminently. I had not appreciated that variations cannot be made during the process, but that does make sense.

      Would it make sense to wait and see what value is ascribed as 'development value' during the freehold purchase process? My thinking is that if that is confirmed as Nil, could I rely on that fact to get consent from the directors of the RTE without having to pay a premium, as any request for a premium would be unreasonable.

      On the contrary if there is say £5k of development value ascribed, I could offer to pay £5k more than everyone else on the agreement that the directors provide consent as soon as they have the freehold.

      Comment


        #4
        Dear GreenClock

        The enfranchisement claim and your requirements are separate issues.

        Assuming enfranchisement completes, the freeholder will be the RTE. I assume you will be a member. Therefore, you stand to gain a part of the premium you might be required to pay.

        I can only repeat:
        You might like to start a conversation with the participating tenants and non-participating tenants, if any, to find out their view of your plans.

        It could be participating tenants want to make changes to their properties too so perhaps you can all draw up a wish list to advance (without payment of premiums [though this is not necessarily the right approach depending upon the circumstances]) when (and if) the RTE acquires the freehold. Unfortunately, as you appreciate, this will not be a fast process.

        In the meantime, once you ascertain views of others you will probably want to discuss the plan with a surveyor re viability and contact the Local Authority’s Planning Dept for an informal discussion as to the likelihood of permission. There are no Permitted Development rights for flats.





        Comment


          #5
          You should let the collective enfranchisement proceed first and raise your proposals AFTER the purchase of the freehold title has been completed.

          Comment


            #6
            Originally posted by vmart View Post
            Dear GreenClock

            The enfranchisement claim and your requirements are separate issues.

            Assuming enfranchisement completes, the freeholder will be the RTE. I assume you will be a member. Therefore, you stand to gain a part of the premium you might be required to pay.

            Yes you are correct, we will be part of the RTE. I was exploring if I could short cut the process to save some time i.e. if there is some development value to be paid -

            Option 1 - All members pay equal shares of any development value up front and then potentially get that back as a premium – The second part would be only happen if any of the leaseholders actually wanted to develop;

            Option 2 - The flats that would benefit from development value pay a higher share of the freehold price now, with the agreement from the RTE company that it will not seek any premium for this development value in the future. This options seems a bit more equitable, else a leaseholder with no development value in their flat would potentially be out of pocket?

            Originally posted by vmart View Post
            Dear GreenClock

            I can only repeat:
            You might like to start a conversation with the participating tenants and non-participating tenants, if any, to find out their view of your plans.

            It could be participating tenants want to make changes to their properties too so perhaps you can all draw up a wish list to advance (without payment of premiums [though this is not necessarily the right approach depending upon the circumstances]) when (and if) the RTE acquires the freehold. Unfortunately, as you appreciate, this will not be a fast process.

            Agreed. The only concern I have is that raising this now might give people false hopes about a development value due to them - where there might not be any. Potentially then causing issues when we request consent from the RTE. Once freehold value agreed, if there is any development value, it will be easy to quantify as we will have had two sets of surveyors already agreed on it, so hopefully would make the conversation easier. Hence thought of starting the conversation one we have agreed the freehold value to be paid.

            Fair point about others wish list.

            Originally posted by vmart View Post
            Dear GreenClock

            In the meantime, once you ascertain views of others you will probably want to discuss the plan with a surveyor re viability and contact the Local Authority’s Planning Dept for an informal discussion as to the likelihood of permission. There are no Permitted Development rights for flats.
            While nothing in life is certain, I am basing our planning hopes on precedent, as such extensions have been carried out on buildings on both sides.

            Comment

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