Lease Extension - Problems

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Lease Extension - Problems

    I am a leaseholder in a flat in a property composed of a total of 3 flats. We the leaseholders own a share of the freehold and are also directors of the freehold company. Our leases have now gone down to 78 years and I am having problems remortgaging. One of the directors/leaseholders has fallen out with us and is refusing to agree with the lease extension. Can we, the remaining two leaseholders/directors extend our leases without the other leaseholder/director agreeing? And what process would we use to to do this in the most cost effective and proper manner?
    Many Thanks
    RPbukhri

    #2
    Yes you can seek a statutory lease extension and you will therefore be serving notice on the company notwithstanding you are a shareholder and director of that company.

    You must proceed carefully to ensure that you do not abuse your position as a director. You cannot make an undisclosed profit from a transaction with the company to which you are a director

    I would suggest you proceed as follows:-

    You should call a meeting of all directors and shareholders and make sure that it is recorded that you are seeking a lease extension and that you are taking steps to ensure the figure put forward is correct because of the position you are in. You invite the troublesome director to nominate a reasonably large local firm of chartered surveyors to calculate the premium. If he declines, then chose a large local firm to which you have never had any dealings with in the past ( and they to confirm this in their report) and ask them to calculate the premium on behalf of the company. All this be recorded at a properly convened general meeting of the company

    Then serve a Section 42 Notice on the company with that figure and again call a meeting and ask the troublesome director to nominate reasonably sized solicitors to act for the company. If he declines again chose a well established local firm to which you have never had any dealings with in the past. Again all this be recorded at a properly convened general meeting of the company

    Then you select a solicitor of your choice to serve a Section 42 Notice on the company and you then as a director, in my opinion, should have confidence to then instruct the other solicitor to accept the notice and proceed with the lease extension.

    The premium will then be paid to the company and you can then pay a dividend back to yourself equal to two thirds of what you have paid.

    You may feel at first a little aggrieved at having to write off 1/3 of the premium, however when the awkward director want a lease extension he will have to do it properly under the Act so you will get your 1/3 of the premiums back and it will grow each year as the lease gets shorter.

    Put this too him, but also remind him that it would be cheaper for all if you all do it at the same time ie offer him an olive branch. The main advantage being that if you all do it together you would save on legal costs, no valuer would be required as no premium would be necessary as all gain and lose the same.

    Comment


      #3
      Thank you sgclacy, does it make any difference to the process you suggest if 2 of the 3 directors/leaseholder vote to extend their leases. Can the company over-ride the other director? And extend there leases.

      Comment


        #4
        Your articles of association will set out how votes are taken and how majorities are set.

        While I agree with SGL's analysis of the cost, do bear in mind that if all three of you purchased the freehold, the value of the lease extension was taken into account in the freehold value.

        If your were well advised, even if the leases were not immediately extended, the agreement between you should have arranged for the lease extensions to be done at nil cost plus costs. If you are all the original purchasers there is a legal argument to be won that charging each other premiums ( and one holding others as a hostage to fortune) is inequitable.

        Review what you agreed at the time.

        This is a common problem.
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          We had no agreement during the freehold purchase covering this. Only myself and the other leaseholder/director who also wants to extend the lease were the original purchasers of the freehold. The troublesome director only moved in 3 years ago.
          The articles of association are those set in TableA of Companies Act 1985 and 1989 and state "No business shall be transacted unless....Two persons entitled to vote at the meeting...a resolution put to the vote of a meeting shall be decided on a show of hands. Does this mean a majority decision can be used to extend the leases.

          Comment


            #6
            I would suggest you get quotes from L&T solicitors experience in statutory 90 years lease extension to give you quotes for legal costs for extending the lease for :

            1. Extending the lease for ONE flat by 90 years for legal cost including valuation by RICS surveyor.

            2. Extending the lease of all 3 flats together to 999 years at peppercorn ground rent.

            3 . As leaseholder of your flat, write to the freehold company and draw attention to the difficulty of remortgaging for leases at 78 years. Point out that for leases below 80 years, Mortgage banks are now reluctant to offer mortgages. This is lowering the capital value of every flat in the block and you request the company agrees to offer new 999 years leases at Nil premium to all leaseholder.

            4. In your capacity as Director and under company headed paper ,send a proposal to all leaseholders with offer of free 999 year lease extension subject to the legal costs being shared by all three flats. Point out that ( a) the proposal can be implemented if 2 or more flats owners vote in favour of the proposal and (b) a extension by just one flat alone at alater date may be disadvantageous because the leaseholder will have to shoulder the legal costs for both sides.

            Comment


              #7
              Originally posted by RPbukhri View Post
              We had no agreement during the freehold purchase covering this. Only myself and the other leaseholder/director who also wants to extend the lease were the original purchasers of the freehold. The troublesome director only moved in 3 years ago.
              The articles of association are those set in TableA of Companies Act 1985 and 1989 and state "No business shall be transacted unless....Two persons entitled to vote at the meeting...a resolution put to the vote of a meeting shall be decided on a show of hands. Does this mean a majority decision can be used to extend the leases.
              Yes it does.
              Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

              Comment

              Latest Activity

              Collapse

              Working...
              X