Assignment of Lease extention at completion

[MollyEllie]

We are in the process of selling our flat. It has a lease of 71 years on it. We have a buyer but they want us to serve notice on the lease so the are able to extend straight away rather than having to wait for the two years.

My question is do we have to agree a price and/or terms with the freeholder when we serve notice, or do we simple serve notice stating that the benefit will be passed onto the buyer and then the buyer can negotiate with the freeholder when the sale completes.

Many thanks

[Corinne Tuplin]

Hi there,

Providing that you qualify for statutory leasehold extension, a Section 42 Notice is served on the freeholder (or competent landlord) and following this an Assignment Notice executed by the seller and buyer transferring the benefit of the right upon completion. I have encountered several invalid Assignment Notices of late and, therefore, I would check that your solicitor has prepared one before.

Kind regards,

Yours sincerely,

CORINNE TUPLIN
PRO-LEAGLE
www.proleagle.com

[Gazou]

My question is do we have to agree a price and/or terms with the freeholder when we serve notice, or do we simple serve notice stating that the benefit will be passed onto the buyer and then the buyer can negotiate with the freeholder when the sale completes.

You do not have to agree a price with the freeholder but Section 42, Leasehold, Housing and Urban Renewal Act 1993 (see http://www.opsi.gov.uk/acts/acts1993...30028_en_1.htm ) provides in sub section (3) that a Notice of Claim (which is the only means of obliging the Landlord to agree to an extension) must, inter alia: -

(c)
specify the premium which the tenant proposes to pay in respect of the grant of a new lease under this Chapter and, where any other amount will be payable by him in accordance with any provision of Schedule 13, the amount which he proposes to pay in accordance with that provision;

(d)
specify the terms which the tenant proposes should be contained in any such lease;

You will see from the 1993 Act (Section 45) that the Landlord can make a counter-proposal concerning terms, including price.


See also post #7 by Jeffrey in the thread at http://www.landlordzone.co.uk/forums...ad.php?t=22082 for an explanation of the legal mechanics of what you intend concerning accommodating your buyer.

[Gazou]

Re the last post, as you will see from the link, I misnamed the 1993 Act - which properly named is the Leasehold Reform, Housing and Urban Development Act.

[sgclacy]

The proposed price must be reasonable, if it is to low the notice served can be rendered invalid.

As to what is to low is the subject of much debate but I would think a value based on the following would be reasonable

Capitalisation of the rent at no more than 8%

The value of the reversion defered at 5% however if you surveyors feels there are truly unique qualities which make the long term maintenance of the builg problematical then a higher rate may be reasonable

In calculating the marriage value using relativity upto about 94%

Remember that by serving the Notice and taking an assignment of it you will become liable for the Landlords valuation fee and certain aspects of his legal costs including checking the validity of the claim and the assignment. Allow around £1,000 for these heads of expenditure