13 February, 2014

Two for the price of none Howard de Walden Estates Ltd v Broome (2012) 

The current vogue of amalgamating adjoining flats, to create a single larger unit, may not always elicit the benefits hoped for.  In an interesting case concerning a lease extension claim under the Leasehold Reform, Housing and Urban Development Act 1993, the County Court held the tenant was not entitled to claim a new lease of the combined flats.   This was on the basis that he had not owned both units (and their respective leases) for the required two years and was therefore not a qualifying tenant under the 1993 Act.   In this case the hapless tenant had bought the leases separately – the ownership period was calculated from the date the second lease was registered, not the first.

For the uninitiated lessee, this is an important reminder to check you qualify for a lease extension claim before service and to always take specialist legal advice.  Where two flats have been joined together, your landlord will look to when the second lease was registered in your name.  If that is less than two years from the date on which you make a claim for a new lease, you will not qualify.  Forewarned is forearmed!

The value of marriage – 80 years and counting

Lest we forget, under the Leasehold Reform, Housing and Urban Development Act 1993 lessees have the valuable right to extend their leases by 90 years plus the term of years currently held.   This is an important right, preserving value in what might otherwise be the dwindling asset of a residential lease.   Perhaps less well known is that the costs of extending can increase significantly once the unexpired term of the lease drops below 80 years.

The reason for this is that under the 1993 Act valuers are obliged to take into account what is known as marriage value whenever a lease term is 80 years or less in duration.  Marriage value is defined as “the potential for increase in the value of the flat arising from the grant of the new lease” and requires that this “profit” be shared 50:50 between landlords and leaseholders.  It is this “profit sharing exercise” that can prove so costly for tenants – and the point is overlooked at their peril.

So what is the moral of the story? Check the length of your lease and if it is close to the 80 year time bomb get in touch with us!