Lease extension

[Galatea]

We are 3 flats with unexpired 64 year leases. Each lessee has 1/3 share of freehold. We have a management company. Each lessee is a director. Each flat has a substantially different market value. The 2nd floor flat has the lowest value, mine on the first has middle and the groundfloor is by far the very dearest. So premiums should be paid according to a surveyor. I approached one lessee, the ground floor owner a few months ago about the extension but she refused to discuss. The other lessee has left without leaving a contact. Relations are generally very very poor between all three.

Yesterday the groundfloor owner met with me and said she was intending to sell her property and she needed both me and the other lessee to sign ONLY for her own lease to be extended to 999 years. But said she would NOT sign an extension of my own lease and would NOT sign the extension of the other lessee either. I said this is unreasonable and leaves me and the other owner without extensions of our leases. I said there was no whatsoever incentive for us to sign and no way to conduct a business.

I do not intend to sign somebody else’s lease extension when they refuse to sign mine. What would be the point? But what could be the outcome of that? Anyway I asked her to put into writing what she said.
Thanks for replies

[Gordon999]

The free guide to statutory lease extension and valuation method method may be downloaded from Lease website :

http://www.lease-advice.org/publicat...nt.asp?item=10

All 3 flats leases need to be extended by "statutory 90 years extension" before the flats are offered up for sale since most buyers require mortgage facility. There is no statutory right for leaseholders to seek a new 999 years lease.

If the leases are extended separately, each must pay the cost of lease extension to the Freehold company. The free guide shows an example of flat with 68 years lease valued at 150K and cost payable for extension is roughly 10,700 but ontop there may be a further 300o-4000 to pay for surveyor fees and legal fees. The freehold company will pay tax at 20% on the fee received and balance can be distributed back to the 3 shareholders who may be required to pay extra income tax (if paying at 40% tax rate ).

However if all 3 flat owners agree to pay and share the legal costs, the "freehold company" can issue new 999 years leases to each leaseholder at NIL premium. So the freehold company has no income and no tax to pay and all of you will save on legal costs , surveyor fees and tax.

[Galatea]

Thanks for the reply and the link. It is now clear when the 999 years are granted. The lessee however, says she does not want the 3 flats to come together and share in the legal costs; she says and that each flat must do extension by themselves. I asked her to clarify in writing what she would like to do.

[JK0]

If neighbour tries to extend by herself, I would just bluster until she loses her buyer. Then she might see the wisdom of collective action.

[Galatea]

Thanks, exactly. It would not make sense of me signing someone else’s lease extension when they refuse to sign mine.

[Galatea]

Lease extension

I have 1/3 share of freehold in a block with 3 flats 1, 2 which is mine and flat 3. The freeholder is a manco made up of owners of each of the 3 flat. Each owner is a director. Majority of 2 directors is required to reach a decision. The leases were until March this year running 64 years for each the 3 flats. The other 2 directors extended their lease last March to free to 999 y using the majority of themselves without need to have my signature. They left me withonly 64 years. Some people find delight in doing so. This type of freehold leaves the third director/owner that is open to abuse by the other 2 and it might cause ganging up of the other two and potentially leads to poor management and bad state of repairs and poor relations between freeholders. All is interrelated in a vicious circle.

I have approached the past 3 years svera times, written and spoken to flat 1 to extend our leases all 3 flats together at low cost and I said I would sign their leases if they sign mine. Flat 3 is hostile and had a police caution due to an assault against me in the stairs so I stayed away from them. The response of flat 1 was “flats 1 and 3 would refused to grant me or sign an extension of my lease buthey would only grant 999 y between themselves” I asked flats 1 and 3 to provide me with details of their solicitor if they had instructed one but they did not respond. I was kept in the dark. Flats 1 and 3 sabotaged my sales in the past 3 years by saying to my buyers who approached them that they would not sign my lease extension and they the buyers had to buy first the flats and next after 2 years pay flats 1 and 3 a premium to get the lease extended. Needless to say my buyers found them unreasonable and quit my sale moreover because they could not get a mortgage. The building has fallen in disrepair, flat 3 cannot afford any repair cost but flat 1 paid part of her costs to have the support of her vote against me. We never had an AGM because matters were decided between flats 1 and 3 and I was left

I got a letter 3 months ago from flat 1 saying she and flat 3 had instructed a joint solicitor, to extend their leases but gave no contact of him/her. They did not even ask me to join in. I felt pointless doing anything because they denied to sign my extension whenever I discusse it. They did extend their leases 2 weeks after that letter - 3 months ago - granting themselves 999 y leaving me with 64 y but I had no idea they did so until today. They did not call a GM and did not even inform me of the extension. They kept me in the dark and so I instructed my surveyor to prepare a valuation for my lease extension so that I used LRHA 1993. He found out the other 2 flats granted themselves extension 3 months ago. There is nothing I can do now except pay a fat premiumto the other 2 directors.

There have been ongoing problems with flats 1 and 3. Now Flat 1 is on the market since 2 months but cannot sell and has no viewrs. I spoke to their agent who was put under misleading impression by the owner of flat 1 that I had no interest in extending my lease. I said that quite the opposite was true. He then said that this refusal shows disputes and can affect the sales of my co-directors and not only my own as it shows an ongoing dispute

I wonder if there is any other solution than applying under LRHA 1993 to get my lease extended

[Galatea]

there might be. Is the freehold owned by a limited company with you each having a third share or just by the three flat owners collectively. this is an appalling story and underlines the merit of having an external freeholder who is impartial as between differing lessees. If it is a limited company and your two co-shareholders have behaved inequitably toward you (as would certainly appear to have been the case) there may be a remedy under the companies act.

Thanks. The freehold is owned by a limited company and Each owner has one third share. I agree there is a merit having a external landlord. We had originally a freeholder who was impartial. He sold the freehold to us. All the problems arose when we bought the freehold. The state of repairs declined. The second lesson in my case is there is a risk in buying a property with shared freehold which has overdue repairs. We have no service charge and when I proposed one this was contested by the other 2 lessees. So we have a disrepair which causes difficulty in selling.

Company Law provides remedies for unfair treatment of shareholders but the costs of Lawyers can be very higher that he costs of pursuing extension via LRHA 93.

Probably I may find cash buyers who would offer me a reduce market value near to market minus deducting the costs of extension.

I do not know if it would work like this: try to find a cash buyer and before the exchange I apply to have the lease extended and sell my flat with the benefit of it.

[leaseholdanswers]

There are remedies and its a relativley simple court proceeding for the court to force a new lease to be issued on the same basis as an equitable remedy in simple terms that given the situation you all be treated the same.

I would look and see if a new lease was granted or it was a simple deed of variation and present whichever in the same form, as a fait accomplait to the directors, sign it or I sue.

Then when that is acheived, you apply for the appointment of an independant manager appinted by the LVT to remove powers from the company, but keep that quiet until your lease is extended your mortgagee has consented and its regisetered at HMLR.

[sgclacy]

As a director why can't you execute the deed of surrender and regramt and grant a lease ext to yourself in the same terms as which the others have done for themselves. One director can execute such a deed and need only have his signature witnessed by an independent person

The other directors can hardly complain as they are skating on very thin ice because if they seek a premium from you when you want a lease ext yet did not levy a premium on their own they could open themselves up to a number of serious allegations

Do get a copy from the land registey of their deeds of surrender and regramt to ensure yours is granted in the same terms

[westminster]

I would recommend you get legal advice. If you send me a PM I can suggest someone.

[Moderator2]

Two related threads have been merged.

[Galatea]

Thanks leasehold

It makes a difference to think there is solution but the cost is the important variable to know. I will look into this and will instruct my conveyacing solicitor to prepare a DoV for my lease to present to my directors. My question to you is: if I do not get my DoV signed what kind solicitor do I have to hav? any? or somebody in company Law - in which case I would not be able to afford. Or can I go ahead by myself to take court action if my DoV is not signed?
can you PM me a recommended Solicitor who has experience of such cases?

[Galatea]

sgclacy,

Thank you I did not know there are solutions, though the important is the cost and time.
I will look into your suggestion and it is helpful. I need first to get the DoV prepared.
I will update.

[sgclacy]

Further to my posting I would make teh following comment

The directors are not automatically in breach of trust by granting a lease extentsion at nil cost, PROVIDED all leases are originally of the same value and are extended at the same price. If they do not do this then they are distributing value to themselves which aside from the legal aspects would of course create a tax implication form them. If you do what I suggest you will be saving them from some serious problems and at the same time getting what you want. The cost of doing the deed of surrender and re-grant should be around £400 plus VAT rising to around £550 plus VAT if you have a mortgagee.

They would be very foolish indeed to accuse you of nay foul play if you grant your lease on teh same terms as they have done

[Galatea]

Good point: well not all leases are the same value: If say No 1 flat is indexed at £100, mine No 2 is £75 and no 3 is £56. The sizes of flats are different and the private garden area/land owned is different.
i will look into that.