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Flat owners urged to act now to protect their investment.

As an owner of a flat, your lease gives you the right to live there for a fixed number of years. Your landlord retains ownership and responsibility for things such as the common parts of the building, car park and any communal gardens. Ownership of your flat will return to the landlord when the lease runs out unless either the freehold of the building is purchased or the lease is extended.

The Leasehold Reform Act 1993 gives flat owners the power to join together to force the sale of the freehold through "Collective Enfranchisement". Ownership of the freehold then goes to the participating leaseholders, often via a company formed specifically for that purpose. This has particular attractions where the management of the building leaves something to be desired. The leaseholders can select managing agents directly accountable to them or decide to self-manage to avoid problems such as excessive insurance commissions or awarding contracts which may not give best value.

Perhaps more importantly, as the years go by, the time remaining on your lease reduces. Many lenders are reluctant to lend on leasehold properties with less than 70 years left to run. It is also important to be aware that once the lease has less than 80 years left to run the cost of extending increases significantly. When the freehold is purchased, you can grant yourself a 999 year lease and reduce the ground rent to zero thereby enhancing the value and marketability of your flat.

If the landlord sells the freehold, you and the other leaseholders usually have a right of first refusal to buy it and take advantage of the benefits described above. It is important to act on any notice received by the landlord quickly otherwise the right will be lost.

Right to Manage.

If you do not wish to purchase the freehold or do not have the funds to do so, the Commonhold and Leasehold Reform Act 2002 provides flat owners with a Right To Manage ('RTM'). Leaseholders can then run their own affairs and make their own decisions about the management and upkeep of their flats, including insurance, repairs, service charges and so on.

The landlord's consent is not required and there is no need to prove mismanagement by the landlord or the current managing agent. The leaseholders (via an RTM Company which they set up and own) have control and in a number of cases may save considerable sums on items of expenditure possibly enhancing the marketability and value of their property.

The Statutory right to extend your lease

When you have owned your flat for two years you usually have the legal right to extend the lease on payment to the landlord of a sum calculated using a statutory formula.

This can be done on an individual basis and as such you are not dependant on others. It is a comparatively simple process and useful if the entire building does not qualify for collective enfranchisement or where the requisite number of tenants to collectively enfranchise cannot be obtained.

Ground rent is reduced to a peppercorn (effectively you no longer pay any ground rent at all). The lease is extended by 90 years which is adequate but is not the 999 year lease which participating tenants under the collective enfranchisement procedure normally grant themselves. In addition this route does not deal with any management issues.

It is advisable to be proactive and act now to protect your lease and investment as the longer you wait the more expensive it will become. As the process of buying the freehold or extending your lease can take some months, a sale could be delayed or jeopardised if the buyer or their lender insists on the lease being extended.

We hope you have found this information useful, however, if you require further assistance, please do not hesitate to contact Jeremy Redfern, Partner at QualitySolicitors Parkinson Wright on 01905 726 789 or email

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