Enfranchisement & RTM
The benefits of lease extensions by private treaty
strictly necessary. Again, the landlord can determine and offer a premium that is open for acceptance by the leaseholder. If a premium is charged, the landlord can opt how this premium can be used and there is the possibility that it can be used for the greater good of the development. For example, carrying out improvements that would otherwise not be recoverable via the service charge. There are benefits to both parties to lease extensions. If lease extensions are to be pursued this way tax advice should be taken by the landlord as offering lease extensions with either zero premium or indeed, if a premium is to be charged, it may trigger a tax liability on the part of the landlord company. If used purely as a lease extension, then lease extensions by private treaty can have enormous benefits and does not need to be treated with the concern or suspicion that seems to have grown some momentum over recent years. Provided parties are clear as to the terms being offered there is every prospect that both landlord and leaseholder can achieve a positive result and potentially in a much swifter timeframe than using the statutory route. It is also important to note that if parties attempt to agree the lease extension by private treaty and are unsuccessful, they are not then precluded from using the statutory route. The moral of the story is that parties need to know what they are both agreeing to. Obtaining legal advice at an early stage will ensure that parties are protected.
year extension, whereas using a lease extension by private treaty can offer parties the opportunity to explore a wider range of terms. Lease extensions by private treaty may be of interest to landlords that are resident owned companies. The directors of these landlords are nearly always leaseholders and therefore will largely have the interests of the development and their fellow leaseholders at heart. The directors of a residents owned landlord have the ability to pass a resolution to agree to offer lease extensions to all of the leaseholders on the development where the terms of the leases are beginning to become low to the point that it may have an impact on the sale of the flat. The directors of the landlord company can agree the length of the lease extension (and this being by private treaty can be any term that the directors wish). A premium can be charged for the lease extensions, but this is not Negative press has detracted from the positives of such lease extensions, writes Liz Rowen
T here always seems to be a lot written about statutory lease extensions, the time frames, the valuation and the benefits of taking this route. However, when I read about lease extensions by private treaty there seems to be a fair amount of caution and suspicion included within those articles. It often feels like lease extensions by private treaty are the poor relation to statutory lease extensions. This is not the case — and obtaining a lease extension by private treaty can have a number of benefits. The popular press is littered with stories about lease extensions by private treaty where they have been used as a mechanism to incorporate terms that are less favourable to leaseholders, Over the years reports have appeared in the press about onerous lease terms being incorporated into leases using a lease extension as the vehicle. This negative press detracts from these kind of extensions as being positive, in the right circumstances, of such lease extensions. What are the benefits? When a lease extension is agreed this widens the scope of the elements to be agreed i.e. the term and the premium. A statutory lease extension will give the leaseholder a 90-
Liz Rowen is senior associate at PM Legal Services
31 ISSUE 108
www.newsontheblock.com
Made with FlippingBook flipbook maker