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In a series of forthcoming guest blogs for Mountgrange Heritage, Mark Chick, Partner of our Landlord & Tenant team discusses his first topic focusing on the issues surrounding ‘tax and leasehold extensions for freehold owners’.

Freehold owners

Tax and Lease Extensions for Freehold owners – Why would a freeholder need a lease extension?

A lot of people think that when they have purchased their freehold to their block of flats that is the end of the story and that they do not need to do anything else to protect their position. However, that is not always quite right as this article explains. There may be a ‘sting in the tail’ if you delay extending your leases to 999 years having bought out the freehold with your fellow flat owners.

Do we still need the leases? – we have just bought the freehold, we can just cancel them can’t we?

Firstly, it is important to realise that if you buy the freehold to your building the leases will still need to remain in place, so the leases cannot just be ‘cancelled.’ The leases will regulate the legal relationship between the flat owners and the freeholder. The freehold owner will normally be a company incorporated by the flat owners for this purpose in which they own a share and which has a separate legal identity.

How to wear two hats

Even in a situation where all of the flat owners have taken part in the purchase of the freehold it is important to realise that there are separate and distinct legal relationships and that every person who has taken part in the purchase of the freehold wears ‘two hats’, one as a shareholder in (and perhaps as a director of) the freehold company and the other, as a long leasehold flat owner.

All decisions relating to the legal ownership of the freehold interest are taken by the company and this includes matters such as the grant of new leases and approvals under the terms of the leases. There will also be separate decisions where there are flats that did not take part about the sale of a lease extension/ share in the freehold company to those flats where valuation advice may be required. Read more …

Future guest blogs are also being planned for the following topic areas:

  • Buying a property needing a lease extension – what to look out for
  • Informal lease extensions – be careful!
  • Will extending the lease cure my service charge problems?
  • I want to include the roof in my new lease when I extend it – can I do this?

For more information, please contact our expert Landlord & Tenant team on leasehold@bishopandsewell.co.uk or call 020 7631 4141.



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