Episode 4: Developer Diaries with Ben Wilson - Leases: Everything you need to know! With Special Guest Rebecca Rinn
Apr 4, 2023
auto_awesome
Rebecca Rinn, a leasehold specialist, joins Ben to discuss lease extensions, types of tenure, collective enfranchisement, license to alters, and ways to monetize leases. The podcast also covers topics such as buying property with a missing landlord, the complexities of leases, lease extension timeframes, financing, making alterations to leased properties, buying airspace, reforms in leasehold franchisement, and acquiring a flat and making modifications.
Lease extensions are crucial for leasehold property owners, especially as the lease drops below 80 years, and involve considerations of marriage value, ground rent compensation, and reversionary value.
Buying the freehold offers benefits such as control over property management, the ability to extend lease terms to 999 years, and the freedom to make changes without landlord consent.
Negotiations between leaseholders and landlords can be protected by applying to the First-tier Tribunal, providing additional time for negotiation and delaying agreements until a more favorable time.
Understanding the costs and factors involved in lease extensions and freehold acquisitions, such as ground rent compensation, finance options, minimum percentage requirements, and commercial property ratios, is crucial for making informed decisions.
Deep dives
Leasehold Property: Importance of Lease Extensions
Lease extensions are crucial for leasehold property owners, especially as the lease drops below 80 years. Waiting to extend the lease can result in significant additional costs due to marriage value. Voluntary lease extensions can be negotiated with the landlord, but terms are often unfavorable. Statutory lease extensions require meeting specific criteria and can take up to six months. Ground rent compensation, marriage value, and reversionary value are factors to consider when calculating the cost of a lease extension. Financing the lease extension concurrently with the property purchase can save on stamp duty. Buying the freehold is becoming more common, allowing leaseholders more control over property management and potential development. Freehold purchases follow a similar cost structure to lease extensions, with considerations for communal grounds and development value. Buying the freehold grants leaseholders freedom to make changes and extend lease terms.
Tribunal and Vesting Order: Dispute Resolution
If negotiations between the leaseholder and the landlord are unsuccessful, applying to the First-tier Tribunal can protect the leaseholder's claim. This application suspends the statutory timeframe, providing additional time for negotiation. Property owners can use this tactic strategically, delaying the agreement until a more favorable time, such as finding a buyer or securing financing. Making an application to the County Court for a vesting order ensures completion if negotiations fail to meet the agreed deadline. Costs fall on the leaseholder until this stage, encouraging resolution and agreement before reaching legal proceedings.
Benefits of Freehold Acquisition
Buying the freehold of a property offers numerous benefits. Leaseholders gain control over property management, enabling decision-making regarding shared spaces and potential developments without the constraints imposed by a freeholder. Financing a freehold acquisition follows a similar cost structure to lease extensions, with considerations for communal grounds, development value, and hope value. Buying the freehold allows individual flat owners to extend lease terms to 999 years, granting security and adding value to the property. Leaseholders can also make individual changes to their properties without the need for landlord consent.
Key Considerations and Cost Factors
Leaseholders should be aware of various factors and costs involved in lease extensions and freehold acquisitions. Ground rent compensation compensates landlords for the loss of ground rent with lease extension. Marriage value becomes applicable when a lease drops below 80 years, requiring additional compensation. Reversionary value accounts for the remaining term on the lease when calculating the cost. One can finance a lease extension alongside property purchase to save on stamp duty. Understanding the minimum percentage required to buy the freehold and the implications of withstanding commercial property ratios is crucial. These considerations play a significant role in determining the costs and benefits of lease extensions and freehold acquisitions.
Summary of podcast episode
This podcast episode discusses various aspects of leasehold properties and leasehold extensions. It covers topics such as leasehold reforms, the section five process, license to alter, and real-world examples of utilizing leases to capitalize on opportunities. The episode highlights the importance of understanding the leasehold system and knowing your opposite number in negotiations. It emphasizes the significance of knowing the law and staying updated on leasehold regulations. The guest advises building a rapport with clients and understanding their end goals to provide appropriate guidance throughout the transaction.
Example 1: Leasehold reforms and section five process
The discussion revolves around the upcoming leasehold reforms, which aim to eliminate qualification rules, introduce standard extensions of 990 years, and abolish the year of marriage value. They also delve into the section five process, which involves serving a section five notice to qualifying tenants for the potential purchase of additional areas, such as roof terraces or communal spaces. Various considerations, including the willingness of tenants to buy, the involvement of head leaseholders and superior leaseholders, and potential legal challenges are touched upon.
Example 2: Capitalizing on leases - Linden Gardens case study
The hosts share two real-world examples of using leases to create value. They discuss a project in Linden Gardens where they bought a first-floor flat with a short lease, negotiated a license to alter, obtained exclusive rights to access terraces, extended the lease, and eventually bought the freehold. They highlight the importance of understanding lenders' and buyers' requirements when structuring such deals, as well as the significance of comprehensive paperwork and relevant planning regulations.
Key takeaways and advice
The episode concludes with some valuable takeaways. It emphasizes the importance of staying informed about leasehold regulations and understanding clients' goals to offer appropriate advice. It also emphasizes the significance of building a good rapport with clients and knowing the opposite party during negotiations. The guest advises staying updated on changes in leasehold laws and regulations while striving to provide top-notch service to clients looking to buy, sell, or extend leasehold properties.
In this episode Ben is joined by Rebecca Rinn, a Partner at Streathers LLP, who specialises in all things leasehold.
Rebecca and Ben talk at length about lease extensions, types of tenure, collective enfranchisement, licence to alters and ways to monetise leases, along with much, much more!
This episode is particularly informing and really goes into the detail on one of the most important aspects of residential property.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
