Who is Responsible?

In self-managed blocks of flats, the responsibility of handling various requests falls on the managing entity, the directors of the freehold management company. Such requests will from time to time include requests from leaseholders seeking lease extensions; that is unless all leaseholders bought the freehold together and during the conveyance to acquire the freehold simultaneously granted themselves all 999-year leases.

Requests for lease extensions can have significant implications for both leaseholders and the overall management of the property. Here we aim to guide how to effectively deal with lease extension requests in a self-managed block of flats, ensuring transparency, fairness, and adherence to legal requirements. Not least because the directors of the freehold management company must achieve the best value for the freehold company shareholders. Company law requires them to.
Understanding Lease Extensions: What is a lease extension?
A lease extension refers to the process of extending the lease term beyond its original expiration date. Leaseholders often seek extensions to secure their long-term residency, increase the value of their property, or address concerns related to diminishing lease terms, the primary concern being a fall in value vis-à-vis an identical property with a long lease. When sitting as a director of the freehold management company it is essential to familiarise yourself with the relevant laws and regulations governing lease extensions to ensure compliance throughout the process. This means Landlord and Tenant Legislation, the Common hold and Leasehold Reform Act, and Companies Acts.

Lease extensions: if you self-manage a block of flats what is the process

To deal with lease extension requests in a self-managed block of flats, it is crucial to establish a transparent process that outlines the necessary steps, timelines, and considerations. This process should be communicated to all leaseholders in advance to ensure clarity and avoid misunderstandings and to ensure that all leaseholders know that bias is not shown to a particular leaseholder and that personal agendas do not get entertained.

Lease extensions guide for self-managing blocks of flats: what you need to know

1. Review Legal Requirements:

Begin by reviewing the legal requirements specific to lease extensions. This means the Section 42 Claim Notice and the Section 45 Landlord Counter Notice and the timescales for service.
2. Assess the Leaseholder's Request:

When a leaseholder submits a lease extension request, carefully review the details. This may include examining the current lease term, understanding the proposed extension period, and considering any relevant factors such as market conditions or property value.

3. Get a Freehold Management Company policy for lease extensions

Formal or informal? Inside the Act or outside? Statutory valuation methodology or freehold company policy for their methodology?

Are informal lease extensions good or bad for the Freehold Management Company?

Informal requests can be dealt with outside the Act. These are when the extension sold is for a shorter term of years than the statutory 90 extra years that can be claimed. The reason for doing so is to preserve the much-needed ground rent to run the Freehold Company and pay its costs. The terms of a statutory lease extension, which are laid down in law, are to reduce the ground rent to a peppercorn (if demanded). An informal lease extension, being fewer years, would ordinarily be cheaper, i.e. sell an extra 30 years, not 90 years.
4. Seek Professional Advice:

Engage with legal professionals or lease extension specialists to ensure accurate interpretation of lease terms, legal compliance, and fair valuation of the lease extension. Their expertise can provide valuable guidance throughout the process.

What are the legal duties of a Freehold Company Director for lease extensions?

As a freehold company director, you have a legal duty not to undersell the lease extension, as your duty to the shareholders or members of the company is to get the best value. In addition, as the leaseholder wishing to extend pays most of the Freeholder's costs, expert advice is a good idea.
5. Facilitate Negotiations

If the leaseholder's request is reasonable and merits consideration, engage in negotiations to establish mutually acceptable terms. This may involve discussing the proposed lease extension period; ground rent adjustments, and other relevant terms and conditions.

Documentation and Agreement 

Once an agreement is reached, document the terms in either a new replacement lease or a deed of variation to extend the lease. This legal documentation will most likely need to be prepared by a solicitor and the leaseholder's mortgage company usually has to be involved to give their consent too. The freehold management company needs to keep a copy of the agreement for future reference.
In conclusion, successfully managing lease extension requests in a self-managed block of flats requires a transparent and well-defined process. By understanding the legal requirements, engaging professionals for advice, and maintaining open communication with leaseholders, you can navigate lease extension negotiations effectively. Remember to approach each lease extension request with fairness, considering the interests of both the leaseholder and the overall community. Transparency and adherence to legal requirements are essential to foster trust and maintain a harmonious environment within the block of flats.