A premium for the lease extension is payable by the Leaseholder, to the Freeholder. The premium is calculated with reference to a number of variables such as the leasehold value, the length of the lease and the amount of the ground rent payable. The rules are complex but there are specialist valuers who can advise on the value of the lease extension and good quality valuation and legal advice is essential.
Once the likely amount of the premium has been ascertained, you can agree the premium to be paid for the lease extension via informal negotiation with the Freeholder or (if that is not successful) by serving a statutory notice. If you cannot settle, an application to the First-tier Tribunal (Property Chamber) is necessary, the valuation of the lease extension will be fixed by the Tribunal from the date of your notice and so, even though the length of the lease gets shorter and prices might rise, the price you pay should not.
I emphasise that it is key to check the remaining term of the lease. If you are selling, extending the term will increase the sale value. If purchasing, you may prefer the seller to extend the lease before purchase or assign to you the right to do so. If you already own a leasehold flat, do not delay in extending your lease. If in doubt, seek advice but always remember that acting sooner rather than later on a lease extension will undoubtedly be to your benefit.
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