Getting a Lease Extension when there's a Head Lease involved

12/08/2019
Getting a lease extension when there is a headlease – or head lease or intermediate lease – is involved is more complicated than if you as the leaseholder were directly dealing with the landlord/freeholder who owns your block but the good news is that the principles remain the same.

This article therefore looks at:



Looking for a lease extension but concerned about an intermediate or head lease?

Our experienced property lawyers will work hardest to ensure that your new lease is legally sound and takes account of the interest of any headleases if relevant.

And whether you're taking a formal or informal approach getting an experienced RICS valuer to carry out your lease extension valuation is an absolute must - we can provide this also (click for more details).

* Fixed Fee – Experienced Lease Extension Solicitors – On all Mortgage Lender Panels



    1

    What's a headlease or head lease? Intermediate lease definition

A leasehold interest that exists in between a flat lease and the freehold is known as a ‘headlease', 'head lease' or ‘intermediate lease’; all terms mean the same thing with the last being the most self-explanatory.

The most common relationship in flat ownership is that of leaseholder and freeholder and more complexity is introduced when an additional lease exists between the freeholder and the flat owner. In this situation, if you're a flat owner, you have what is known as an ‘underlease’ or 'sublease'.

As a result, the owner of the headlease is the ‘immediate landlord’ of the flat owner.

What's the point of holding an intermediate lease?

Being an intermediate leaseholder offers business opportunities with some similarities to being a freeholder but without the greater power of ownership etc. that the latter party has.

In addition to selling the individual flats, an intermediate leaseholder might also benefit from the sums paid towards and the influence which comes from maintaining, repairing and insuring the building or block.


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    2

    How can having an intermediate lease complicate a lease extension?


    1
    Who is the Competent Landlord?
When you seek a statutory lease extension , you firstly have to seek out the person called the competent landlord in order to serve your prescribed claim on them because it is they who will ultimately grant the lease extension.

Now in most cases, this person is the freeholder of the building or block in which the flat is located.

In legal terms, the competent landlord is the first landlord above the underlease who is capable of granting the 90 year extension. Often the competent landlord will be the flatowner’s immediate landlord, but there are circumstances where they do not have sufficient years on their own headlease to grant the underleaseholder the additional 90 years.

Intermediate leases will normally be granted for longer terms than underleases, but an intermediate leaseholder clearly can't grant a formal 90-year lease extension as prescribed by law if the 90 years goes beyond their own lease term.


If it's found that the competent landlord in a matter like this is in fact the freeholder, this freeholder would conduct the lease extension claim on behalf of the other intermediate landlord(s).

Separate prices would obviously need to be proposed in the notice of claim in respect of the effect of the extension on the freehold and headlease.

In fact an intermediate landlord can try to conduct things themselves if their ownership or the premium is in question by serving a notice of separate representation, however, the case of Stella Kateb vs.Howard de Walden Estates (2016) heard before the Court of Appeal tends to suggest that an intermediate leaseholder has limited powers in all these regards and might have to apply to County Court for remedy.

    2
    Subleaseholder tries to agree an informal lease extension with the freeholder
If you as a sublease holder try to agree an informal lease extension directly with your freeholder, whatever might be agreed in this private lease extension risks being legally unsound because of the the complexity and interaction with the intermediate lease title.

The freeholder’s solicitors may not be prepared to offer an adequately worded new Lease that both protects the leaseholder’s position and is acceptable to mortgage lenders.

With a direct approach like this, the focus is predominantly - and understandably - on the premium (price of lease extension) to be paid with little attention given perhaps to matters such as maintenance, repairs and insurance for the building or block.

If these latter matters are not considered, individual flat owners might later on find it difficult to sell or remortgage their flats and correction of the legal flaw might prove costly in retrospect.

Therefore, if you are a flat owner and are seeking a formal Section 42 Lease Extension or an informal lease extension, it is extremely important not only to get a RICS lease extension valuation you can rely on for accurate premium bargaining purposes but also to instruct experienced lease extension solicitors who can, for example, ensure right from the start that:

  • you are conducting negotiations with the competent freeholder; and
  • any intermediate/head leases - if there are any involved - are taken into account when it comes to drafting the new lease.


Looking for a lease extension but concerned about an intermediate or head lease?

Our experienced property lawyers will work hardest to ensure that your new lease is legally sound and takes account of the interest of any headleases if relevant.

And whether you're taking a formal or informal approach getting an experienced RICS valuer to carry out your lease extension valuation is an absolute must - we can provide this also (click for more details).

* Fixed Fee – Experienced Lease Extension Solicitors – On all Mortgage Lender Panels



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