13 June 2013 by

Short Lease? Take the benefit

When buying or selling a flat you may sometimes come across the conundrum of the flat having a “short lease”.  But what is this and what are the implications for dealing with a flat like this and obtaining funding to purchase it?

For the purposes of buying a flat a “short lease” will often be considered to be a lease with 85 years or less to run.

If you are interested in buying or selling a residential property with a short lease, and the buyer requires a longer lease, then, subject to certain criteria being met the statutory right to extend the lease should be assigned to the buyer.  Some lenders will not accept a short lease as security for a loan and this is often the principal reason to secure an extension (and assign the benefit to the purchaser).

Sellers do not always have the capital to extend the lease or may not have the time to complete the statutory lease extension process.  They can however use the sale process and the asking price to reflect the perceived cost of extending the lease.  In order to qualify for a statutory lease extension, the new owner will not be able to extend the lease until two years following completion of the purchase.  This may be circumvented however by requiring the seller to assign their ability to extend – provided of course they themselves have the two year qualifying ownership.  In any case, the priority should be to obtain an extension prior to the threshold of 80 years at which point the cost to extend the lease increases substantially.

So how is the right to extend the lease assigned to a buyer?

This is done by way of a formal deed.  This process has the advantage of putting the lease extension in motion.  It means also that the buyer will not be required to wait two years from acquiring the flat to make the claim to extend the lease, which may increase the price of the lease extension.

The Deed of Assignment will govern how the lease extension process is dealt with, including who serves the lease extension notice, pays the fees, pays the statutory deposit and complies with which elements of the statutory requirements.  As this will be tied into the sale process the Deed of Assignment will be negotiated at the same time as the sale agreement.  If this element of the sale is not completed correctly it can result in the claim being ‘deemed withdrawn’ and the owner being barred for making a new claim for 12 months.

If you are interested in buying or selling a “short” lease or require specialist advice regarding the lease extension process generally, please contact our specialist Lease Extension and Enfranchisement team, Darren Coleran or William Bethune.

31 May 2013 by Yezdan Izzet

Stress or distress? An update on the landlord’s remedy of distress

It can be a major stress on any commercial landlord’s business when their tenant defaults on the rent. The common law remedy of distress presently allows a landlord to instruct bailiffs to seize and sell goods from their tenant’s premises to an equivalent value of the rent arrears.

6 June 2013 by Vincent Billings

LLPs: Handle With Care

Limited Liability Partnerships (LLPs) were introduced in England on 6 April 2001 and have many advantages, including limiting the personal liability of their members while being taxed in the same way as traditional partnerships.

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