Can you Extend a Lease Twice?

[Richardo]

If I negotiate with my F to extend my 71 year lease to say 99 years and continue paying the £200 GR (so outside of the Act) can I (or new qualifying purchaser) subsequently go back and achieve a 90 year extension no GR under the Act.

The advantage is that whilst Sportelli is currently "defining" GR deferment rates, reversion rates remain open to negotiation.

Also if the second extension was with over 80 years term then MV negilible.

My conveyancer thinks you can't, but the DCLG site suggests you can extend leases in perpetuity.
Any ideas?

[jeffrey]

If I negotiate with my F to extend my 71 year lease to say 99 years and continue paying the £200 GR (so outside of the Act) can I (or new qualifying purchaser) subsequently go back and achieve a 90 year extension no GR under the Act.

The advantage is that whilst Sportelli is currently "defining" GR deferment rates, reversion rates remain open to negotiation.

Also if the second extension was with over 80 years term then MV negilible.

My conveyancer thinks you can't, but the DCLG site suggests you can extend leases in perpetuity.
Any ideas?

1. If lease has >80 yrs unexpired, MV is nil.
2. If extension I is non-statutory, you still have statutory rights available for extension II.
3. If extension is non-statutory, it can be for as long a new term as parties agree (eg 999yrs). Statutory extension is 90 yrs always, so leads to replacement lease granted for unexpired term of old lease + 90.

[Richardo]

thx Jeffrey.

Ok so extending outside of the Act doesn't limit statutory rights.

Yes we could go to 999 years but I didn't mention the lease has an increasing GR of 1/200th of flat value every 21 years. Although we currently pay £200 until 2020, current GR would be £625 based on £125,000 value.

So in reality extending on same terms isn't a good deal, but if we do a statutory LE cost will be c.£10k+. As we are medium-term sellers, a non-statutory extension under current terms would be significantly lower cost. As posted elsewhere, remaining term is usually the issue, not GR.

MV at 80 years is deemed to be so small it can be ignored, but it isn't nil. We went to LVT (766) with 79.7 years remaining (qualification rules at the time delayed us) and F made great play of this point. MV was decided at 2% even though RT was 79 years and 9 months.

Hence my sensitivity!

[jeffrey]

thx Jeffrey.

Ok so extending outside of the Act doesn't limit statutory rights.

Yes we could go to 999 years but I didn't mention the lease has an increasing GR of 1/200th of flat value every 21 years. Although we currently pay £200 until 2020, current GR would be £625 based on £125,000 value.

So in reality extending on same terms isn't a good deal, but if we do a statutory LE cost will be c.£10k+. As we are medium-term sellers, a non-statutory extension under current terms would be significantly lower cost. As posted elsewhere, remaining term is usually the issue, not GR.

MV at 80 years is deemed to be so small it can be ignored, but it isn't nil. We went to LVT (766) with 79.7 years remaining (qualification rules at the time delayed us) and F made great play of this point. MV was decided at 2% even though RT was 79 years and 9 months.

Hence my sensitivity!

...and statutory extension eliminates ground reny with immediate effect.
As to "80 year" point, see para. 4(2A) in Schedule 13 of 1993 Act: "where... the unexpired term...exceeds eighty years, the marriage value shall be taken to be nil". Not just small- none at all.

[Richardo]

Hi Jeffrey

The LVT in its wisdom put considerable weight on s.128 of the 2002 amendments.

(2A) Where at the relevant date the unexpired term of the lease held by any of those participating members exceeds eighty years, any increase in the value of the freehold or any intermediate leasehold interest in the specified premises which is attributable to his potential ability to have a new lease granted to him as mentioned in sub-paragraph (2)(a) is to be ignored."

Fs have (sucesssfully) claimed in a number of LVTs that the above paragraph confirms MV exists above 80 years and hence a relativity exists the second after midnight on the 79th year remaining. In our case a whole lot of relativity graphs were produced supporting this claim.

Whilst i'm not convinced the LVT decisions are correct, we got our CE for £5k against the £13K the F wanted, so we were more than happy with this, especially as it was a DIY job.

[jeffrey]

Hi Jeffrey

The LVT in its wisdom put considerable weight on s.128 of the 2002 amendments.

(2A) Where at the relevant date the unexpired term of the lease held by any of those participating members exceeds eighty years, any increase in the value of the freehold or any intermediate leasehold interest in the specified premises which is attributable to his potential ability to have a new lease granted to him as mentioned in sub-paragraph (2)(a) is to be ignored."

Fs have (sucesssfully) claimed in a number of LVTs that the above paragraph confirms MV exists above 80 years and hence a relativity exists the second after midnight on the 79th year remaining. In our case a whole lot of relativity graphs were produced supporting this claim.

Whilst i'm not convinced the LVT decisions are correct, we got our CE for £5k against the £13K the F wanted, so we were more than happy with this, especially as it was a DIY job.

Yes. Glad to hear that you came through OK.

BUT s.128 of 2002 Act amended para. 4 of Schedule 6 to 1993 Act. That Schedule is headed "Freeholder's share of marriage value".

It did NOT affect Schedule 13 to 1993 Act. Result: freeholder might well have an increased share of MV, but MV=0. Even twice nil is still nil!

[Richardo]

Jeffrey

I take your point but there are a couple of LVT decisions (ours included) whereby MV is deemed to exist >80 years but has to be disregarded.

Hopefully this post will be useful to anyone in the same boat we were. If I had had your knowledge then we would have pushed the issue.

Very many thanks