Are You Near Exeter on 22nd October?

Are you near Exeter next Thursday; 22nd October?

If you are – or if you can travel down to that part of the world – come and see my presentation to the Property Investors Network.
Click here for details.

I’ll be talking about the two biggest subjects people pay me to teach them about.

Firstly, I’ll be explaining about ‘short leases’ and what you do about them. Owners and buyers of leasehold flats can lose £000s if they don’t know the system – and freeholders will rip them off, big time. But there are simple things you can do to make sure you get a good deal. I’ll teach you all about it – with no legal gobbledigook.

Secondly, I’ll be explaining the other end of the scale – brand new leases and how you can maximise freehold value. All you have to do is remember ‘shaving foam’. Yes, shaving foam. It sounds crazy – but remembering it will make you extra £00,000s on your next title splitting project. Again, no legal jargon – just simple, no nonsense education and tips.

Seats have almost sold out – so click here now to book your place. And if you’ve never been to a pin meeting before, use voucher code WALES and I’ll pay entrance fee.

I look forward to seeing you there.

Best wishes.

Bernie Wales

Bernie Wales says RTBL. Watch this video to see why.

Hello, my name’s Bernie Wales and I’m here to give you a short video with some advice which generally would solve 99% of leasehold problems.

I get people visit my website and book up 15 minute slots because they have a problem and they want advice to do with their leasehold flat, or their block of flats, or the management thereof. And in 99% of cases they have the answer themselves if only they knew where to look.

And my motto is RTBL – Read the Bloody Lease!

In the world of flats and leasehold, the lease is the rulebook; it gives you the rules by which the freeholder has to behave, the leaseholder has to behave and, if appropriate, the management company as well. It’s all the dos, the don’ts, what you must do and what you mustn’t do.

And, if you read that lease, then nine times out of 10 you can get the answer to what your problem is. Or a pointer that will take you to where the answer is.

Now don’t be intimidated by it. Yes, leases are long, boring documents; they’re written by lawyers, they have some legal gobbledygook in there but, if you calmly look through it with your problem in mind, you’ll tend to find that the sections that you need will jump out at you, particular words will jump out at you, and if you look at those it will give you a hint.

Hopefully you’ll find your answer. If not, then go to my website – – book up a 15 minute slot, send me the lease and I’ll be glad to find the answer for you.

So, thank you for watching and I look forward to speaking to you soon.


Short Lease – Buying From A Dead Leaseholder

I recently had an enquiry from an investor who was looking at buying a flat with a 70 year unexpired term on the lease; a short lease. The leaseholder had recently died and his mum and sister were selling the flat.

Here’s what I advised.

Further to our discussion, I attach the Freehold and Leasehold titles which I downloaded from Land Registry .


You’ll note the freeholder is Mr C. This might be good … or bad … because an individual may not know the extension process and may agree a good deal … or the individual may be scared by the process and refuse to talk. But at least it isn’t one of the institutional landlords, who would give you a hard time on the extension process.

The leaseholder is Mr A.  You indicated that he has died – but this doesn’t change the fact that he is the leaseholder. He will remain the leaseholder until the lease is assigned to a purchaser. I suspect therefore the mother and sister are dealing with the flat as executors, rather than new leaseholders – as no change of ownership has been registered at Land Registry.

I suggest your course of action should therefore be (provided the deal is a good deal and meets your criteria):

  • Agree to a conditional exchange;  conditional upon i) the leaseholder/executors signing … and satisfactorily serving … your Section 42 Notice, and ii) with a delayed completion (see below)
  • Once the Notice is served, you take over the negotiations with the freeholder – and agree the terms for the extension of the short lease
  • Complete the lease extension and the purchase on the same day, with your mortgage attached to the extended lease

As we discussed, the leaseholder has not owned the flat for two years. According to the title document he purchased on 12th February 2013, registered 18th March 2013. Consequently the leaseholder cannot force the freeholder to extend (via the Section 42 route) until after 12th February 2015. You may therefore need to revise the above to:

  • Agree to a conditional exchange, with a delayed completion
  • Agree a “Licence to Occupy” allowing you and/or your tenant to occupy the flat until completion
  • Pay a monthly Licence Fee to the leaseholder – to cover the ground rent, service charge, etc
  • Let the flat on a similar Licence to your ‘tenants’
  • Informally negotiate with the freeholder to see if a commercial agreement can be reached on the extension
  • If necessary serve the Notice and then formally negotiate with the freeholder – and agree the terms for the extension of the short lease
  • Complete the lease extension and the purchase on the same day, with your mortgage attached to the extended lease
  • Terminate the Licence with your ‘tenants’ and replace with an Assured Shorthold Tenancy

A note of caution : Check the current mortgage (if any) allows for the flat to be let out.

When negotiating with the freeholder remember:
The Section 42 process provides for a 90 year extension to the present short lease term … and the ground rent reviewed to a peppercorn … for the calculated premium

  • You may not need +90 years and could therefore agree a shorter extension for a lower premium (perhaps just extend to 125 or 99 years)
  • You may be prepared to pay a ground rent; say £300pa. This would add to the capital value of the freehold (by roughly 10x the ground rent) so negotiate an appropriate further reduction in premium; e.g. £300pa G/R … £2,000 reduction
  • Finally, doing a commercial deal now will put money in the freeholder’s pocket NOW, not in six months’ time.

Lastly, remember you are required to pay the freeholder’s reasonable legal and valuation costs – once the Section 42 Notice has been served and you’re forcing the extension of the short lease. Allow £2,000 or so … and a similar amount for you own fees.

Having read this article, if you have a short lease query – or a general leasehold query – and need some advice, click here to book a 15 Minute Quick Consultation

What Are The Ballpark Costs To Extend The Lease?

I recently had a leasehold enquiry from a property investor looking at lease extension possibilities.

He told me:
I have come across a property in Reading – 26 Topnotch Court which is up for sale at £130K through an estate agent who makes it as difficult as possible to get in touch and talk to the owner. (Not just this property but in general.)

So far I know it has 65 years to run. The freeholder is Topnotch Developments Ltd. The service charge now is £90 per month and the ground rent is £70 per year.

I have been trying to get the term and dates of the lease, the original ground rent, review dates etc but I am being met by a stone wall. The estate agent claims that the owner is refusing to get this as Topnotch want to charge £1000 for this info.

I suspect if this had an extension this property would be worth about £150K.

My preliminary questions are 1) is it worth pursuing, 2) can you tell from this the ballpark costs to extend the lease? 3) is it worth paying money to Topnotch to find more? 4) What do you think?

My reply was as follows:

1) is it worth pursuing? I don’t know, that depends on whether this property fits into your investment strategy.

2) can you tell from this the ballpark costs to extend the lease? I could have an educated guess – but not all the facts are confirmed.

3) is it worth paying money to Topnotch to find more? I wouldn’t pay £1,000 to find out the lease details and have them clarify their view of the lease extension price. I would:

  • Download the leasehold title from HM Land Registry for £3 to clarify the lease term and date, and the original ground rent. I suspect it will say £35pa … and if it is a 99 year lease, then the original ground rent will have doubled after 33 years to £70pa … and will double again after another 33 years to £140pa.
  • I would then enter the information here : to get an initial ballpark figure for the extension premium
  • And here too : and then I’d compare the two
  • I’d then research on Zoopla, or wherever, to see the sold prices within Topnotch Court – looking for the price of unextended flats … and extended flats (to check your £20k margin)

What do you think? Once you’ve gone through that process, I think you’ll find the extension premium is likely to be £10k to £12k (for the full 90 years and peppercorn ground rent), to which you need to add the landlord’s legal and valuation costs (£1,500 to £3,000) and your own legal and valuation costs (similar). So you might be looking at a project cost of £148k at the top end, before any other costs such as repairs/refurbishment.

But it all depends what your strategy is – and what you’re intending to do with the flat.

Think of a lease extension as “cream on the cake”. You need to ensure the cake tastes good first; i.e. there needs to be a good reason for buying the flat in the first place – and then use a lease extension to overcome the mortgage barrier, etc.

I hope that helps.
Best wishes.
Bernie Wales, FIoD, FIRPM, AssocRICS

If this article interested you, find out more about short leases and lease extensions here >


“Final and binding” service charge … may not be

The case of Windermere Marina Village Ltd v Wild and others [2014] UKUT 163 [LC] was recently decided in the Upper Tribunal. It looked at a common phrase seen in residential leases, namely that “ the determination by the Landlord’s surveyor shall be final and binding”. The decision said that that wording was void under s27A[6] of the Landlord and Tenant Act 1985.

It is quite common for leases to say that the service charge expenditure should be apportioned between the various leaseholders as determined by the landlord’s agent or surveyor. It is also common for those leases to say that in the event of a dispute his/her determination would be valid and binding upon the parties.

In this case, the leaseholders contested the situation and the Upper Tribunal found in their favour. Which means … the First-tier Tribunal (Property Chamber) now has jurisdiction to substitute its apportionment in place of that determined by the landlord’s surveyor – and to override the provisions of the lease.

So what does this mean for the many landlords – and managing agents – who manage under leases with such a wording? Well, firstly they need to ensure they follow current guidance on such matters – and ensure their determination is fair and equitable in the circumstances existing at that specific property. In smaller residential properties that might be reasonably easy and obvious – but in larger mixed use developments, with flats and shops and offices, the task will be much harder as there are often several views about who benefits most from specific services.

How long will it be before the First-tier Tribunal is flooded with cases questioning “final and binding”?

Case details here >

Freehold Title Splitting – Where Do I Start?

My Telephone Consultation Service tends to keep me fairly busy with all kinds of questions to do with my area of expertise.  This time the question was about how to get started down the road of freehold title splitting. Here’s what I had to say;

Dear ?????

Thank you for your questions about getting started down the road of freehold title splitting … and the main things you should be considering.

Sourcing suitable properties can be time-consuming, especially if you let estate agents send you details of every large property they have on their books. You really need to be clear about exactly the type of building you’re interested in – and reject everything else they send … explaining why, so they hopefully learn for next time.

Rather than approaching estate agents, I would suggest contacting lettings agents instead. Ask them if they have any ‘tired landlords’ or retiring landlords on their books – particularly where the landlord lives in part of the property. The properties they show you will most likely be interesting and if you’re really lucky you’ll find buildings which are presently one freehold building, but which have been physically split into several flats. These are ideal because there is limited building work to do – although you will have to check that they meet Building Regulations and have Planning Permission … even if the landlord says they comply and have been signed off.

The other advantages of such situations include the landlord probably not needing to sell in a hurry. This opens the possibility of an option, or a delayed completion, or a joint venture. All these methodologies have advantages for your cash flow – and when you add the fact that the landlord already has tenants in the property … you’re on a winner as you’ll have cash flow from day one.

Buying the property has a number of considerations. You’ll probably need commercial finance, a bridging loan or … best of all … private funding. Whichever route, get started on the ‘vetting process’ now, as it can take many weeks to complete. Better to have the funding ready but no property, rather than the other way around.

But make sure your lender understands your business plan and in particular the fact that you’re going to be ‘slicing’ their security and selling it off bit by bit (in most cases). Make sure you have a clear agreement on how flat sale proceeds will be distributed – some to the lender and some to you, so that all are happy.

Also consider whose name the property should be in. Usually it’s best to buy the freehold in a company name – as with most ‘trading’ activity. Retain any flats you’re keeping in your personal name – as with most ‘buy and hold’ property investment. But you should check your particular tax circumstances with your accountant – well in advance.

Using my “Shaving Foam Technique” (see note below) create the leases in such a way as to maximise the residual freehold value. This will maximise your selling price for the freehold after the flat leases have been created – but if you’re hanging on to any flats long-term, make sure you don’t shoot yourself in the foot with onerous lease clauses. And if you need help finding a freehold ground rent investor, you know where I am.

If you haven’t seen my presentations on ‘The Shaving Foam Technique’ you’ll be interested in my Leasehold Home Study Course.  This will also give you a good understanding of leases and leasehold generally – which will save you a fortune by avoiding costly errors. Find out more here >

Ultimately, there’s a lot to know when it comes to freehold title splitting but it does open a very big door to some very good opportunities.

Best wishes.

Bernie Wales

My FREE Download – Perfect if You’re Selling a Flat With a Short Lease

I’ve just released my latest FREE download, which I’ve written to help people faced with a specific issue that more and more have to face … selling a flat with a short lease. No-one looks back on that awful moment when their Estate Agent tells them that they have a Short Lease with anything other than gloom. But hopefully this FREE download will change that for you.

My FREE guide’s called, quite simply, “What To Do When Your Estate Agent Says You Have a Short Lease”.

What To Do When Your Estate Agent Says You Have A Short Lease CoverAt the end of the day, property can be a precarious business – and this is no more so, than when selling a flat.

Flats are almost always leasehold, which means that you don’t own – and are not selling –  the flat, at all. You’re simply selling the right for your buyer to live there for a pre-determined period of time – and the purchase price they pay is buying them the Lease – which entitles them to rent the flat … for an awefully long time.

This is an important distinction that most property investors (and home owners) simply don’t understand. More importantly, they don’t appreciate the legal differences between freehold and leasehold and the implications that this and having a Short Lease can have.

If you’re selling a flat and your Estate Agent turns around and says that you have a ‘Short Lease‘, you need to know what that means, you need to understand the implications it carries with it and you need to understand what you should be doing about it.

My latest  FREE Download will put you in the picture, explain what this all means, what the implications are and what you can do about it. So, just complete the form below, to get your FREE copy of;

What To Do When Your Estate Agent Says You Have A Short Lease

I’ll also keep you updated with the latest news from the world of leasehold property targeted, specifically, to help property investors generate more profit, more often in more creative and less competitive ways.

Is The Dog Next Door Driving You Barking Mad?

Leasehold problems or issues come in all shapes and sizes but issues over dogs in flats are fairly common.

I recently received a letter from a leaseholder with some concerns over the fact that a neighbour is keeping a large dog in their flat. Being based in Wales, there are some differences in the law and the way it’s applied but the overall principles of the approach you should take, if faced with a similar situation, are the same.

Please note that it’s really important to look at the lease, as it should contain all of the information you need to guide you along the right path to resolve any issue.  You’ll see that I am making a few assumptions in my response and I make it clear that you do need to make sure that you have the correct information before acting.  Making assumptions is never a good thing to do.

Here’s my response;

Dear ?????

Thank you for your letter and question.  I note that you have a problem with a large dog being kept in a neighbouring flat – although you don’t state precisely what the problem is; e.g. barking noisily, causing damage to the property, or crap being left in the communal garden areas. (These are just a few of the common problems that relate to keeping dogs in flats.)

I’ve taken a look through the copy lease you sent over, although it doesn’t say which flat it relates to.

For the purposes of my response, I’m going to assume the lease you sent over is yours and that the leaseholder with the dog has a similar lease, although, it’s never wise to assume things in leasehold situations and you, definitely, need to clarify whether this is the case.

Your lease is a tri-partite lease – which means that the lease involves three parties; the freeholder, the residents’ management company [RMC] and the leaseholder.  T Ltd is the RMC.  The freeholder was M Ltd originally – but as you’ve included in the paperwork the Memorandum & Articles of Association for L Ltd, I assume they are the current freeholder (but as I’ve said, it is not wise to assume).

Does Keeping Dogs in Flats Breach the Terms of a Lease?

In this particular case,  THE SECOND SCHEDULE clause 8 points us in the right direction. It states “No animal bird or reptile shall be kept in the flat without the written permission of the Lessor WHICH if given shall be deemed to be by way of licence revocable at will.”   Consequently, if the leaseholder has a document from the freeholder – not from the RMC – granting permission for the dog to reside in the flat, there would be no breach of the terms of the lease.  If the leaseholder has no such document, then a breach will exist.

There is a page missing from the copy lease you provided, but I note the clause before clause 7.  {at the top of the page and numbered (i)} states “The Management Company shall take all reasonable steps to enforce the observance and performance by lessees of the other flats in the Estate of the conditions and covenants in the Leases of the other flats which fall to be observed by the lessees …”   Consequently if you write to the RMC directors and advise them of the dog, they should investigate and either take action to remedy the breach, or advise you (by way of a copy) that there is a letter from the freeholder granting permission for the dog to be in the flat.  HOWEVER, the rest of that clause indicates that the RMC can request you to provide security for the cost of any proceedings … and indemnify the RMC in respect of any costs incurred.

Similarly, clause 7.(d) of the lease requires the freeholder to take reasonable steps to enforce the terms of the lease, if requested to do so by a leaseholder in writing.  Again you would have to indemnify the freeholder in respect of any costs incurred.

Of the two, I would suggest you write to the freeholder and request that the appropriate action be taken – or they provide you with evidence of permission having been granted.  I say this because the freeholder has the power to repossess the flat (if necessary) whereas the RMC does not (as they never possessed it in the first place).

I note from some of the other papers you sent me, there was a proposal in 1996 for the RMC to take over the shares of L Ltd.  I assume (see caution above) that merger took place and T Ltd is now both freeholder and RMC.  That doesn’t change the legal responsibilities under the terms of the lease – but T Ltd should be careful to clarify in correspondence which hat it is wearing (so to speak). If it has written to the offending leaseholder as the management company, then there is an argument that that permission would not be valid. On the other hand if it has written as the freeholder then the permission would be valid.

As an aside, I note you enclosed a copy of a letter from T Ltd dated 16th February 2014 detailing an increase in service charges from £100.00 to £125.00 [per month]. There is also a copy of the estimated service charge schedule dated 11th January 2014.

Although the provision of a service charge budget is required by the terms of the lease – service charges do not become due until formally demanded.  Such a demand must be accompanied by a Summary of Rights & Obligations – in the correct form … which is different in Wales than the one we have here in England.  Section 153 of the Commonhold & Leasehold Reform Act 2002 refers.

Consequently you could refuse to pay the service charges until they are demanded correctly, with the correct Summary attached … monthly, if they want to be paid monthly.  However, I don’t want to encourage you not to pay your service charge – but it is a thought worth considering.

As the law is slightly different in Wales, could I suggest you discuss this with the Leasehold Advisory Service (Wales) … which is based in Cardiff. The telephone number is 02920 782 222.

I hope the above assists.

As you can see, there are many possible complications to consider when it comes to keeping dogs in flats.  Ultimately, every lease needs to be looked at, individually, before you can assess whether or not there is an issue and, if there is, the appropriate course of action to take.

If you do find yourself in a similar situation and in need of advice, please do use my Telephone Consultation Service.  I’m always happy to help, if I can.

Yours sincerely

Bernie Wales

Here’s an Interesting Question About Title Splitting – But it’s Not What you Think

Here’s another great question from my Telephone Consultation Service. This time it’s regarding Title Splitting, although there is a bit of a twist to this one, so, many thanks to Keith for an excellent question;

“Hi Bernie.  I wondered if I can do title splitting on a property where the owner doesn’t own the freehold. I’m asking because I’m looking at a property in Tottenham where planning is in place for a 2 room + bathroom conversion in the loft. I want to make it a self contained 2 bed flat so there are 2 x two bed flats. Haringey council own the freehold and there is a council tenant on the ground floor. The vendor occupies the first floor and has planning for the second floor loft space.  Can you advise as I wanted to purchase and split the title?  Best Wishes.  Keith”

Now, the conventional thinkers out there may be thinking “No. You can’t do freehold to leasehold title splitting if you don’t own the freehold. Move on.”  Well, that’s quite true.  But, in theory, there’s nothing to stop you taking an existing leasehold title and splitting it into two separate parts.

BUT … and this is a BIG BUT … as leaseholder of a property remember, you don’t own the property. It is not your building and you can’t go knocking holes in it, adding bathrooms, putting new stairs up to the loft, and the other things you want to do here. The leaseholder is only renting the property – admittedly for a very long time – but still only renting.

So what do you do?

The starting point, as always, is R T B L.  Read the bloody lease.  You need to establish in the first instance whether the existing first floor lease includes the loft space. In all likelihood it doesn’t. The flat probably stops at the ceiling and everything above that belongs to the landlord. In which case, you’re proposing spending £000s on somebody else’s property.

But let’s assume for the sake of this article, the lease does include use of the loft space. What then?  Well, it’s still not possible to go full steam ahead and carry out your conversion works. If you carry on reading the lease, you’ll see it says the leaseholder must not alter the property in any way. Cutting a hole in the ceiling and fitting a staircase IS altering the property – significantly. So is cutting holes in the roof and fitting Velux windows.  If you do that, the freeholder will claim you’re in breach of the terms of your lease and they’ll commence legal proceedings for forfeiture.

So, is  this project is a non-starter?

Not necessarily.

Assuming the numbers stack up – what you need to do is approach the freeholder, negotiate and agree a “Deed of Variation”. You want to extend the demise of the flat from just the first floor to include the second floor too.

You’ll also need to agree with the freeholder a “Licence to Alter” … which will allow you to change the structure of the building from its present configuration to the new two flat format.

Now I’m sure the freeholder will agree to signing those documents – provided you pay them to do so. Exactly what price they come up with, will depend upon the ‘value’ of the loft space and the development profit you’re likely to make. Those numbers will differ from property to property and area to area, but it won’t be a few hundred pounds.  I recently agreed similar documents in Twickenham at just over £139,000!!!  (But Twickenham is a bit more expensive than Tottenham.)

So Keith, pay the council the £000s you agree and away you go. Get your crack team of Polish builders to do the work and you’ll make a handsome profit at the end of the project … just in time for the neighbours to claim £000s in damages because their adjoining flats are cracking because of your building works!

So having paid the council their money, you then need to have a structural surveyor inspect every adjoining flat/house  (below, left and right) to record the condition of those properties. A “Party Wall Award” will need to be agreed with every owner of every neighbouring property (freehold and leasehold) before you begin works.  That way in a year’s time when they claim “there’s a crack” you’ll have documentary evidence to prove the crack was there long before you arrived on the scene – or not, as the case may be.

Life’s not simple Keith. Especially in the world of leasehold.

Good luck.”

The message here is that, whatever you want to do, there’s almost always a way to do it. The important part is understanding the process, knowing exactly what’s involved and following the process to the letter.

The great thing with projects like this is that they offer an excellent opportunity to make a very good profit. Even better is the fact that most people will overlook the opportunity because they don’t understand the process, which gives you an excellent advantage.

Best wishes.

Bernie Wales

Short Leases and Defrauding HMRC

Here’s another great question from my Telephone Consultation Service.   This time it’s regarding some very short leases and you can see my response, below;

Dear ?????

Further to our discussion about your leaseholder owned freehold company and your need for lease extensions.

I note you said your leases have an unexpired term of around 50 years – which is quite ‘short’. You therefore need to be careful about the valuation of the lease extension premium – as slight variations of the figures can have a dramatic effect on the end value when the unexpired term is so short.

The starting point as usual is RTBL … Read The Bloody Lease.  We need to obtain, for each lease, the following information:

  • the original lease terms; e.g. 99 years from 25th March 1990
  • the original ground rents; e.g. £50.00 per annum
  • the ground rent review dates and amounts

We also need to know the approximate market value of each flat.

Once this information is to hand, we can calculate the approximate lease extension premium, for each flat.

You’ll then need to instruct a specialist solicitor to act for you. I could recommend one, or you can locate one on the ALEP website, here > or the Leasehold Advisory Service website, here >

This should be done as soon as possible – because there are Anti-Money Laundering and Client Identity procedures to follow.

Now, ordinarily where the residents are both leaseholders and shareholders in the freehold company – or joint freeholders personally – you’d agree a nominal sum for the lease extension and ensure that the freeholder’s costs were covered … but there would not be £000s changing hands for the extension premium. This seems obvious, because there’s little point in you sending £000s to your freehold company, for it to use the cash as dividends for a distribution of profits. Why send the money round in a circle?

HOWEVER … there is a potential problem with lease extensions for very ‘short leases’, such as yours.  If you were dealing with an unconnected freeholder, you’d have to pay many £000s for your extension. The true value of the extension is in reality quite large – which means your freehold company should (if using the correct figures) make a large profit. And large profits mean … Corporation Tax is payable!  You need to ensure you don’t inadvertently defraud HMRC by completing the process at an artificially low price, just to eliminate the profits. HMRC would no doubt frown on this – if they found out.

On a related issue, it’s worth ensuring the directors of your freehold company have ‘Directors & Officers Insurance’.  This only costs a couple of hundred pounds per year, but provides cover should anyone decide to commence legal proceedings against your volunteer directors – in circumstances where they may have made an unwise move (or not made a move, as appropriate).

D&O Insurance can be widely obtained. However I use St Giles Insurance Brokers, here >  (Ask for Monica Hubbard and tell her Bernie sent you.)

I hope this helps.

If you haven’t checked it for a while, find out how long you have to run on your lease and arrange your lease extension before it gets to the stage of being very short.

Best wishes.

Bernie Wales