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Can flat-owners modernise or update their leases if they own their freehold?

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Can flat-owners modernise or update their leases if they own their freehold?

Leasehold Property Associate Niki Adkins looks at whether co-freeholders can modernise or update their leases. Niki discusses the benefits of lease modernisation and the steps involved in doing so.

Owning a share of the freehold in your block of flats usually means that you and your neighbours have more control and say over how your building is managed.

However, as we explained in previous articles, it doesn’t mean that the flat-owners, can do whatever they feel like.

Usually, the flat’s lease still remains in place; therefore, the flat-owners are bound by its provisions; both as individual leaseholders and collectively as owners of the freehold.

See our related articles below, if relevant to you:

Can I alter or improve my flat if I own a share of the freehold?

Do I need to extend my lease if I own a share of the freehold?

What are the benefits of modernising my lease?

My team and I have dealt with numerous blocks of flats where the flat-owners collectively wanted to both extend their leases and to modernise them at the same time. 

Both extending and modernising a lease would improve the flats’ sale-ability and mortgage-ability for the future.

As leases are usually originally granted for 99 or 125 years, a lot can change during those 99 or 125 years.

Certainly, mortgage lender criteria changes on an almost daily basis, so what was acceptable back in the 1970s or 1980s may be outdated today.  Modernising leases is therefore a sensible ‘house-keeping’ task.

How to make a start on collectively modernising leases

The first thing to do is gauge how many flats are interested.  If you’re just extending the length of the leases (and officially reducing ground rents to zero), it doesn’t really matter if only a handful of flats extend their leases to begin with.  The others can simply do it later on. 

What are the benefits of collective lease modernisation?

However, if the leases are to be modernised, updated or changed in certain ways, it may be best if all leases are updated at the same time; which will likely be impossible if some flats don’t own a share in the freehold. 

The reason for this is to avoid contradictions between the leases in the building. 

For example, you don’t want to vary service charge percentages or service charge estimate/collection mechanisms without everyone doing it at the same time, as that could cause endless headaches from a management point of view.

Furthermore, some leases include a covenant (a legal promise) requiring the freeholder to ensure that all leases are in similar/the same format in the building.  As a result, the freehold-owners could face enforcement action if they allow the leases to be in different formats.

Therefore, our advice is for the freehold-owners to discuss the proposals between them and establish whether 100% agreement is possible. 

What might need to be modernised in my lease?

We often consider leases and advise as to what should ideally be updated from a legal point of view. The most frequently-needed modernisation we find is the building’s insurance provision and the specific risks that need to be covered.

However, we can’t advise what would work for you at your individual building from a day-to-day management point of view; or even a personal preference point of view!

Legal advice on lease changes and modernisation

Clients that we have assisted in the past have often asked their building’s managing agent for their input in relation to what could be changed in the leases. 

A managing agent’s perspective is really helpful as they are the ‘dual-purpose’ party who will likely understand the legal implications of lease-covenants, but will also know the building personally and what would or wouldn’t work for the site.

Some clients have success with simply going through their leases together and discussing what should stay, go or be amended.  We find subjects such as pets, subletting and carpeting often cause the most friction amongst flat-owners.

How much does lease modernisation cost?

Once interest has been gauged and a decision has been made as to what should be varied (if anything), my team and I would be able to put together a costs estimate so that each owner knows roughly what the venture is going to cost. 

It is difficult to provide a costs estimate for modernisation without knowing the level of work to be involved.

Straight-forward lease extensions to a freehold-owner (without variations) are easier to provide costs for.  The costs reduce per flat with the more flats that are involved, as there is an inevitable duplication of work. 

Again, though, we can provide a costs estimate specific to your building once we know how many flats are involved. 

We would draft either a Deed of Lease Extension or a completely new lease (depending on the specific situation) that would then be offered to the freehold-owners for their acceptance.

What are the timescales for lease modernisation?

A straight-forward lease extension usually takes around 8-12 weeks.

However, if modernisation / variation is required, it is possible that all Deeds/leases would need to be completed on the same day. 

That would mean that all documents would need to be signed and returned and all mortgage lenders’ consents (if any) obtained before everyone’s documents can be legally completed.  Inevitably, the larger the building, the longer the timescale.

Specialist Leasehold Property Solicitors

Our specialist Leasehold Property Team are one of the largest in the region and happy to assist any buildings in this situation.

If you have any questions, please call 01202 499255 and a member of the team will be happy to chat about your situation and your specific requirements.

We offer all new clients a free initial chat with one of our bright, knowledgeable lawyers.