Section 61 and my Landlords rights for an order of possesion

[andyg1]

Hi All

I wonder if anyone can set my mind to rest, i am the leaseholder of the flat in question . In 2008 i employed a firm of solicitors to extend my Lease . It was a 99 year lease granted in 1978 and it was eventually extended for an additional 90 years . During negotiations my solicitor advised me that the landlord wanted to add some clauses allowing them to buy the lease back from me at the end of the original 99 year lease . They advised me to go ahead and have include the following Demise (Word Doc attached ) that as i read it again today concerns me . The landlord owns 8 of the 12 flats and the commercial premises beneath and has actively bought all flats that have come to market . It is a prime high street site for development and i worry about the new clause for the 5 years before 2050 of gaining a court order for possession to redevelop . Where would that leave me ? Many Thanks Andy

[Gordon999]

Cannot open the file. What does the clause say about compensation ?

[Macromia]

A statutory lease extension under the 'Leasehold Reform, Housing and Urban Development Act 1993' would include a redevelopment clause with terms like those in your attachment.

Under section 61 of LRHUD Act 1993, posession of the flat would only be given if the court is convinced that proposed redevelopment makes this necessary and cannot be given before the date the unextended lease would have expired.
Compensation will be awarded to the leaseholder with the amount being the valuation that the extended lease might be expected to achieve on the open market.

I don't consider it something to worry about (although it may limit the value of your lease to market expectations and mean that you will be unlikely to be able to hold out to sell at an inflated price - unless you find a buyer will more money than sense).

[andyg1]

In consideration of the sum of Nine Thousand Seven Hundred and Fifty Pounds (£9750 ) receipt of which the Lessor herby acknowledges The Lessor with limited title guarantee demised to the Lessee the Premises To Hold the Premises to the Lessee for a term of 172 years from 25th March 1978 Together With the rights granted by the Existing lease but Excepting and Together With the rights granted by the Existing Lease but Excepting and Reserving to the Lessor the right (a) at any time during the period of 12 months ending 25th December 2077 and (b) at any tie during the period of 5 years ending on 25th December 2150 to apply to the court under Section 61 of the Act for an order of possession of the Premises on the ground that for the purposes of redevelopment it intends to demolish or reconstruct or to carry out substantial works of construction on the whole or a substantial part of any premises in which the flat is contained and that he could not reasonably do so without obtaining possession of the Premises and the provisions of that section and of Schedule 14 to the Act shall apply accordingly And Also excepting and reserving to the Lessor the matters excepted and reserved by the Existing Lease Yielding and Paying Firstly a rent of one peppercorn per annum ( if demanded ) And Secondly on demand such sums as are payable under the tenant's covenants in the Existing Lease and Thirdly on demand all other sums payable by the Lessee hereunder

[andyg1]

Firstly than you for taking time to reply and i have typed out the demise 1. that i was concerned about . I can see i have mistakenly used the date 2050 rather than 2150 for the Section 61 for development . This seems now not be a concern . However what effect does the clause for the 12 months preceding December 2077 ,which would have been the end of the original lease , on the value , saleability of and mortgage issues for a buyer ?

Does this also mean the only way i would achieve full market value of any sale would be if the the Lessor purchased the flat in those 12 months in 2077 or that date passes ? Otherwise it appears if i sold the flat to a new leaseholder they inherit the possibility of their lease only protecting them for 55 years or until 2077 , assuming the Lessor chose to apply Section 61 ?

Thanks Again

[Gordon999]

You need to consult a solicitor on whether you are selling a flat with 55 years lease or 130 years lease. I do not think L forum can answer your question.

Also you should ask solicitor whether you should extend the lease to 999 years after the laws are changed next year ?

[andyg1]

Thank you Gordon i would take the 999 year lease if it removes the Development Clause

[andyg1]

Thank you Gordon i would take the 999 year lease if it removes the Development Clause

[Macromia]

You need to consult a solicitor on whether you are selling a flat with 55 years lease or 130 years lease. I do not think L forum can answer your question.

Why?

The new lease grants a term of 192 years from 25th March 1978.

This means that the flat is leased until 2170.
If you sold the property now, the buyer has 148 unexpired years remaining.

What the 2077 clause means is that, in 2077 (when there would still be 93 years remaining if there are no other changes) the freeholder can ask the court to allow them to, in effect, force the leaseholder to sell them the property so that the block can be demolished or redeveloped. The freeholder would have to pay whatever the property would be realistically valued at on the open market if it was NOT going to be redeveloped and was being sold as a 93 year lease.

[Macromia]

Thank you Gordon i would take the 999 year lease if it removes the Development Clause

It is highly unlikely that any changes will remove redevelopment clauses that would allow freeholders to demolish/redevelop property at the end of the original lease term.

[andyg1]

Thank you . Would my solicitor have been able to extend the lease without this new clause ?

I am comfortable with the fact the property will remain mortgageable for any future buyer , less comfortable that the property value may be reduced as a result of the development clause . Presumably there must be stacks of properties with similar issues .

[Macromia]

Thank you . Would my solicitor have been able to extend the lease without this new clause ?

No, not without the freeholder's agreement.

The clauses in the 1993 Act that enabled statutory lease extensions say that a clause allowing potential purchase in accordance with section 61 should be included in the new lease (and if a non-statutory extension is sought the freeholder can insist on pretty much any clause they like being included, as long as it doesn't contradict any legislation, or refuse the extension).

[sgclacy]

In 55 years time, you may be faced with the possibility that the freehold is able to buy your flat at its market value.

You undertook that exercise in 2008 so if you were just 21 then this "problem" would concern you when you are 90 - if freeholder can satisfy the court about their intentions they could acquire it for its market value. Realistically, the chances are that they would offer slightly more than market value to avoid the stress and bother of making an application to the court.

[Macromia]

Realistically, the chances are that they would offer slightly more than market value to avoid the stress and bother of making an application to the court.

That's quite possible - but it would depend on the freeholder and on whether or not they think that any leaseholders will refuse to sell voluntarily (I doubt that it would cost much more to get court orders requiring several leaseholders to sell than just one).

[sgclacy]

Realistically, a commercial minded organization would, before incurring significant legal costs making an application, have nothing to lose by approaching the lessee and being prepared to offer slightly than the market price. Nobody will know of course what will happen, as it is some 55 years into the future. I would be more worried in the meantime about a possible meteorite hitting the earth on 26 August 2032

https://qz.com/139875/what-it-would-...u-survived-it/