Shamin Kashem: Transfer Of Equity
Shamin Kashem is a Solicitor at the award winning Housing and Property Law Partnership. For this article he is looking at why flat owners who jointly own their property and who are about to sign a Transfer of Equity (e.g. as a deed of gift, or on separating/divorce, or perhaps due to a remortgage) should seriously consider a lease extension under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). It could save or could lose thousands of pounds!
Anyone with a long lease who wishes to extend it under section 42 of the 1993 Act must have owned their flat for at least 2 years before they exercise their statutory right.
What you might not realise is that if the property is transferred without first making a lease extension claim, the person who retains the flat could lose the right to extend.
This is because the remaining owner might not be able to carry forward any previous period of ownership and so the ‘two year clock’ could be reset upon a transfer of ownership and that person would then need to accumulate another two years of ownership before they qualify for a lease extension.
This could prove costly because the price of a lease extension is partly dependent on the length of the lease- the shorter the lease is, the higher the premium you pay. So if a person has to wait 2 more years to extend their lease he or she may end up paying a higher premium for the lease extension.
It is therefore vital for anyone who jointly owns property contemplating a Transfer of Equity to get advice and see whether they should serve a notice.
SO WHAT SHOULD I DO?
You should first check your title deeds to see how the property is jointly owned. Where you own the property with a co owner as ‘joint tenants’ you each share the whole property. So if that property is transferred to one of you then the remaining owners previous period of ownership counts towards the 2 years total ownership and they can serve a notice in their sole name as soon as they have 2 years ownership under their belt.
If you own the property as ‘tenants in common’, you each have a specified share in the property. When the property is transferred to one of you, the previous period of ownership may not be counted, and you might need to accumulate a further two years of ownership before you can exercise your right.
You should next check your lease length – if it’s below 85 years you should seriously consider serving a notice to extend that lease before the transfer completes into your name.
This is especially important for those leases that have 80-82 years left to run, because if someone has to wait two more years and the lease drops below 80 years (even by a day) the amount payable to the landlord can jump up significantly – possibly by thousands of pounds.
If you fall into one of categories above, you would be advised to get a lease extension claim underway as soon as possible and ensure it is then passed on to you as the remaining owner, on completion of the transfer of equity. This is done by legally assigning the benefit of the notice to the remaining co-owner at the time of the transfer. That will mean you won’t have to wait two years but continue with the existing claim within the statutory timetable.
For further information, please contact:
Leasehold Enfranchisement & Conveyancing
Tel: 020 7553 9000
Fax: 020 7553 9001
DDI: 020 7553 9005
Housing & Property Law Partnership
99 Charterhouse Street,
Solicitors of the Year 2011/2012
HPLP is Regulated by the Solicitors Regulation Authority