It is my understanding that a lease extension under s.42 notice grants the leasehold owner the right to 90 additional years at a peppercorn ground rent, and with the ground rent for the term also being reduced to a peppercorn.
In my property there is a headlease (Management Company), which means that although the premium for the lease extension is straightforward enough, it potentially creates a negative income stream for the headlease, because they will no longer collect ground rent, but will still have to pass it on to the freeholder.
My understanding is that usually what would take place is negotiation between the headlease and the freehold such that they would collect some (or all) of the premium due to the headlease, and in return also reduce their ground rent to a peppercorn.
However, because there is a headlease, my understanding is that the premium due for ground rent is calculated at a significantly lower interest rate, and thus has a higher present value, and results in a significant premium (which would equate to very many years of ground rent).
Subject to agreement with the management company (which we leaseholders run). Would it be possible to serve a section 42 notice, and proceed with the lease extension. However, once the lease extension is granted (or perhaps before if it does not affect the statutory process) could there be a separate agreement between the (sub)leaseholder and the Head Leasee, such that rather than a large premium being paid, or it be returned in exchange for a clause somehow inserted upon the (sub)leaseholder that would mean that a sum equal to the ground rent would continue to be paid for the remainder of the term to the HeadLeasee, such that no negative income stream is created, and thus the premium paid could be returned.
Is this form of private agreement a viable option, and is it something that has come up before? I appreciate negotiation outside of the Act would be one way of resolving this, however the freeholder proved impossible to deal with and would only offer very poor terms, hence the progression with s.42 notice.
Thank you for your guidance, I appreciate it is something that I will need to seek legal opinion on, but I just wanted to run it past the community here, because it seems like there are a large number of knowledgeable people who may have experienced something like this before, so that I know the right things to say to the solicitor in due course.
In my property there is a headlease (Management Company), which means that although the premium for the lease extension is straightforward enough, it potentially creates a negative income stream for the headlease, because they will no longer collect ground rent, but will still have to pass it on to the freeholder.
My understanding is that usually what would take place is negotiation between the headlease and the freehold such that they would collect some (or all) of the premium due to the headlease, and in return also reduce their ground rent to a peppercorn.
However, because there is a headlease, my understanding is that the premium due for ground rent is calculated at a significantly lower interest rate, and thus has a higher present value, and results in a significant premium (which would equate to very many years of ground rent).
Subject to agreement with the management company (which we leaseholders run). Would it be possible to serve a section 42 notice, and proceed with the lease extension. However, once the lease extension is granted (or perhaps before if it does not affect the statutory process) could there be a separate agreement between the (sub)leaseholder and the Head Leasee, such that rather than a large premium being paid, or it be returned in exchange for a clause somehow inserted upon the (sub)leaseholder that would mean that a sum equal to the ground rent would continue to be paid for the remainder of the term to the HeadLeasee, such that no negative income stream is created, and thus the premium paid could be returned.
Is this form of private agreement a viable option, and is it something that has come up before? I appreciate negotiation outside of the Act would be one way of resolving this, however the freeholder proved impossible to deal with and would only offer very poor terms, hence the progression with s.42 notice.
Thank you for your guidance, I appreciate it is something that I will need to seek legal opinion on, but I just wanted to run it past the community here, because it seems like there are a large number of knowledgeable people who may have experienced something like this before, so that I know the right things to say to the solicitor in due course.