How to Extend Your Shareholder Lease
There are two main types of property ownership; freehold and shareholder. The difference between the two is that a freeholder will own their property outright, whereas a shareholder will own a lease to their property.
A shareholder lease does not mean that a person is renting the property. Instead, it means that they have signed a contract which gives them ownership rights for a pre-agreed term. Most shareholder agreements tend to be quite long – over 100 years in many cases – after which time the ownership rights will revert back to the property’s rightful freeholder.
Why Will a Lease Need to Be Extended
A shareholder lease does not revert back to default every time it is sold to a new buyer. Instead, ‘time served’ is factored into the buying agreement, with the buyer purchasing the property for the its remaining years. In some cases, the new buyer might acquire a shareholder property which still has plenty of lease life remaining. In other cases, a property might be sold with only a few years remaining. In this case, the buyer may which to apply to the lease owner to have the lease extended.
Steps for Extending a Shareholder Lease
The first thing to remember, if you’re intending to buy a shareholder property and extend the lease, is that the buyer has no right to an extension if the freeholder is not in agreement. There are some instances in which a lease extension can be forced, but this method can’t guarantee you that an extension will be granted and therefore shouldn’t be relied on. Always check your potential eligibility for an extension, before buying a shareholder property.
In order to apply for a shareholder lease extension, the buyer should take the following steps:
- Acquire the services of an expert residential property management, who will be able to advise you on your rights.
- Take all costs into consideration.
- Decline any proposed lease variations, if possible.
- Get all your paperwork in order – delays can severely hold up, or even ruin outright, a lease extension application.
- Notify the freeholder as soon as you are ready.
- Observe all waiting times, and be prepared to act when they expire. For example, a freeholder will have a minimum of 2 months to respond to your offer, after which you may ask a county court to intervene.