Leasehold Extension Advice – Jargon Explained
Lease, freehold, reserve funds…… Lost in translation? Not anymore. Make sure you study these common legal expressions and you will soon be speaking leasehold extension language. Nightmare solved.
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Absentee freeholder:
The situation where the freeholder, the person who owns the freehold of your building, cannot be found.
Click here to read more about the problems caused by missing freeholders, and how we can help
Assignment:
The legal term for the sale or transfer of a lease
Conveyance:
It is signed when someone buys a property and documents the change of ownership of land. Without the transfer taking place, a sale is not legally completed.
Court Appointed Manager:
The right of leaseholders to apply to the First Tier Property Tribunal to request an order for a particular block management company to manage your block. An alternative to the right to manage (see below).
Click here to read more about Court Appointed Property Managers
Enfranchisement:
The process by which a number of leaseholders join together to exercise their legal right to buy the freehold of their block of flats. Also known as freehold purchase, collective lease and leasehold enfranchisement. Enfranchisement also refers to the freehold purchase of house by its leaseholder.
Click here to read more about lease enfranchisement or house enfranchisement
Estate:
It refers to ownership of land – either leasehold or freehold.
Execute:
To sign a document.
First Tier Property Tribunal:
The FTT [ previously known as the Leasehold Valuation Tribunal or LVT] is is the tribunal to which any leasehold extension application will go if agreement on the premium for the leasehold extension cannot be reached between leaseholder and the freeholder.
Click here to read more about the First Tier Property Tribunal
Formal lease extension:
An alternative description of a statutory leasehold extension – see below
Freehold:
Ownership of land and any buildings on that land (alternative to leasehold).
Freeholder:
The owner of the freehold – commonly called the “landlord”
Ground Rent:
A small amount of money you pay for the land your property sits on. An important term when dealing with extending your lease.
Hope value
A sort of future “marriage value”. It is based on the additional value which a purchaser might “hope” they can get in future (for example the ability to extend a flat into the roof or to build additional property in the garden).
Informal lease extension:
An alternative description for a private, voluntary or non-statutory leasehold extension
Joint Tenant:
More than one person owns the land in question. Click here to read more about the difference between joint tenancy and tenancy in common
Landlord and Tenant Act Acquisition Orders:
Rarely used order under the 1987 Act permitting leaseholders to forcibly buy the block from the freeholder if that freeholder has breached maintenance, and management duties
Lease:
A contract signed by tenants when a property or land is rented out.
Lease extension:
Your legal right, in certain circumstances, to extend the lease on your flat by a further 90 years. This is often the easiest solution to buying a flat with a short lease
Leasehold:
Property reverts back to owner when the lease expires so essentially, you rent it for a period of time (usually 99 or 125 years when the lease was originally granted).
Leaseholder:
The owner of a long leasehold flat or house (i.e. a lease which was originally set for at least 21 years) and the person who is entitled to make a statutory application for a lease extension
Leasehold Valuation Tribunal
The Leasehold Valuation Tribunal or LVT is the old name for the First Tier Property Tribunal.
Lease Term:
The length of time that the lease is valid for before it will need to be renewed.
Legal Charge:
A legal term sometimes used in place of ‘mortgage’.
Lease expiry:
If you allow your lease expire, you will become a tenant, with no form of ownership – your security of tenure will expire with the lease and the value of your property will cease to exist.
Marriage value:
This is an additional premium which can be demanded by the freeholder when you apply for a lease extension as soon as your lease drops below 80 years.
This additional cost is why it’s very important to extend your lease before it drops below that critical 80 year length – and when you do put in a formal, or statutory, application to extend your lease, the length of the lease freezes – allowing you to complete the lease extension without the lease dropping below the 80 year point in the interim
Participation Agreement
A formal document committing those involved in a leasehold enfranchisement application to the freehold purchase of their block.
Click here to find out more about how a Participation Agreement works
Peppercorn rent:
Once you have extended your lease you will be charged a peppercorn rent – a nominal amount of money annually, which substantiates you legal position as a tenant, renting, by way of the lease, the property. Having a nominal ground rent makes the property more marketable and is one of the major factors in encouraging people to apply to extend their lease.
Power of Attorney:
This is authority given by someone to allow another person to act on their behalf.
Premium:
The price you will need to pay to your freeholder to extend your lease. It’s always important to get a specialist lease extension surveyor to get the right value for that premium
Register:
Usually refers to the HM Land Registry who record property ownership details in England and Wales. If you want to buy a property then you’ll need to pay for a number of registry services to make sure that your mortgage company is happy to lend you the money you need. Get acquainted with this for leasehold extension plans.
Reserve Funds (also known as sinking funds):
The landlord collects sums in advance to create a reserve fund to make sure that enough money is available for future scheduled major works, like external decorations or lift replacement. Useful to include in leasehold extension agreements.
Reversion
The value of the right to have full ownership of the property returned to the freeholder at the end of the lease
Right of first refusal:
Provided you qualify, if your freeholder wants to sell the freehold of your block of flats, they must offer to sell to you first.
Click here to read more about the right of first refusal
Right to Manage:
The legal right of leaseholders to join together to force their freeholder to handover the right to manage their block.
Click here to learn more about setting up your own right to manage company
Property Sinking Funds:
A fund paid into to by flat owners in a leasehold apartment building to cover future large, one-off future costs.
Click here to find out more about leasehold property sinking funds
Section 42 notice:
The original application form that starts the formal lease extension process.
Click here to read more about the section 42 lease extension notice
Statutory lease extension:
The legal right of a qualifying leaseholder to claim a 90 year extension to their existing lease. Also referred to as formal lease extension.
Click here to read more about the difference between a private and statutory lease extension
Tenancy:
Temporary possession of land or property owned by another. Simple term to use and understand in extending your lease.
Tenant:
Person who lives in a property or on land covered by a lease.
Tenants in Common:
If more than one person has an interest in land then if they were to die the ownership would not pass to the surviving party but would form part of their estate. Check this out with your lawyer when extending your lease.
Tenure:
Land is held on certain terms, the most common being leasehold or freehold.
When you consult a specialist lawyer to guide you further, you will find the process of leasehold extension or lease enfranchisement so much easier to handle.
Unexpired term
The time left on the lease
Valuation:
The process of calculating the premium payable to the freeholder to extend your lease.
Vesting order:
A court order enabling leaseholders to complete lease extensions, enfranchisement or right to manage applications in the absence of a missing freeholder. the vesting order is also a very useful tool to persuade any awkward freeholder to cooperate, for example, keeping to the strict timetable involved in any statutory lease extension or freehold purchase application
Click here to read more about vesting orders and missing freeholders
Voluntary lease extension:
The process by which a leaseholder negotiates a leasehold extension of whatever length with their freeholder – without exercising their legal right or the formal application process. Also referred to as an informal lease extension
Your leasehold extension – getting the right advice
When you consult a specialist lawyer to guide you further, you will find the process of leasehold extension or lease enfranchisement so much easier to handle.
Here at Bonallack & Bishop, we have a specialist 5 strong leasehold team. They do nothing but lease extension, enfranchisement and right to manage applications. That makes them 1 of the biggest and most specialist teams of their type in the country. And we are always happy to offer FREE initial phone advice.
