Question 1

Perpetuity

Accepted Answer

Q: Each resident’s lease refers to "the perpetuity period" as eighty years from 1994. The management company owns the freehold, and the freehold lease refers to 999 years from 1993. My question is (although it will not be of concern to me!) what needs to happen in 2074 to ensure continuity for residents of the day? FPRA Hon Consultant Lubna Islam replies: Reference in the leases to the ‘perpetuity period’ does not mean the lessees rights will cease upon expiry of the perpetuity period. The leases would have been granted when the development was completed. It is likely all services - eg drains, ditches, watercourses, gutters, pipes, wires, cables etc - were not fully laid at the time. The leases therefore granted the lessees the right to use all such services that were present at the time or laid within the perpetuity period - 80 years being more than sufficient for the landlord to lay all services. By now, all services would have been laid and therefore nothing will change in 2074. The lessees will continue to enjoy the rights contained in their leases to use the existing services in the development. Subsequent Query Q: Thank your for your response to my question regarding the length of the leases, and I understand that the 80 years is almost irrelevant, but it is causing a problem to mortgage lenders, so my supplementary question is: can we change the lease to be the same as the freehold lease ie 999 years from 1993, and if so how should this be done to make it acceptable to mortgage lenders? Lubna Islam replies: Yes, it is possible to vary the term of the leases. However, the freeholder must agree to enter into a Deed of Surrender and Re-Grant to amend the term to 999 years from 1993. The parties can agree other modifications to the leases where outdated eg reference to ‘perpetuity period’ can be deleted as this has now been abolished. It is also common for ground rent to become one peppercorn ie nil where a lease is extended to 999 years. Where lessees have a mortgage, their lender will need to provide a Deed of Substituted Security to carry forward the charge to the new title for the new lease. In the event the freeholder does not agree to extend the term, the lessees pursue their rights under The Leasehold Reform, Housing and Urban Development Act 1993 to obtain a statutory lease extension for a term of 90 years in addition to the term of years currently remaining at a nil ground rent. In the case of a statutory lease extension, there is no need to obtain the mortgage lender’s consent as this is implied by the legislation. [submitted March 2016]

Question 2

Perpetuity

Accepted Answer

Q: Each resident’s lease refers to "the perpetuity period" as eighty years from 1994. The management company owns the freehold, and the freehold lease refers to 999 years from 1993. My question is (although it will not be of concern to me!) what needs to happen in 2074 to ensure continuity for residents of the day? FPRA Hon Consultant Lubna Islam replies: Reference in the leases to the ‘perpetuity period’ does not mean the lessees rights will cease upon expiry of the perpetuity period. The leases would have been granted when the development was completed. It is likely all services - eg drains, ditches, watercourses, gutters, pipes, wires, cables etc - were not fully laid at the time. The leases therefore granted the lessees the right to use all such services that were present at the time or laid within the perpetuity period - 80 years being more than sufficient for the landlord to lay all services. By now, all services would have been laid and therefore nothing will change in 2074. The lessees will continue to enjoy the rights contained in their leases to use the existing services in the development. Subsequent Query Q: Thank your for your response to my question regarding the length of the leases, and I understand that the 80 years is almost irrelevant, but it is causing a problem to mortgage lenders, so my supplementary question is: can we change the lease to be the same as the freehold lease ie 999 years from 1993, and if so how should this be done to make it acceptable to mortgage lenders? Lubna Islam replies: Yes, it is possible to vary the term of the leases. However, the freeholder must agree to enter into a Deed of Surrender and Re-Grant to amend the term to 999 years from 1993. The parties can agree other modifications to the leases where outdated eg reference to ‘perpetuity period’ can be deleted as this has now been abolished. It is also common for ground rent to become one peppercorn ie nil where a lease is extended to 999 years. Where lessees have a mortgage, their lender will need to provide a Deed of Substituted Security to carry forward the charge to the new title for the new lease. In the event the freeholder does not agree to extend the term, the lessees pursue their rights under The Leasehold Reform, Housing and Urban Development Act 1993 to obtain a statutory lease extension for a term of 90 years in addition to the term of years currently remaining at a nil ground rent. In the case of a statutory lease extension, there is no need to obtain the mortgage lender’s consent as this is implied by the legislation. [submitted March 2016]

Perpetuity

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