A section 98 agreement, also known as a section 98 notice or leasehold enfranchisement, is a legal agreement between the landlord and the tenant of a residential building, specifically in the context of a condominium. This agreement allows the tenant to exercise their right to buy the freehold or extend the lease of their property. In this article, we will explore what a section 98 agreement entails and what it means for condo owners.
What is a section 98 agreement?
To understand what a section 98 agreement is, it`s important to first understand the concept of leasehold and freehold. In a leasehold, the owner of the property (the landlord) grants a lease to someone else (the tenant) to occupy the property for a specified amount of time, usually 99 or 125 years. In contrast, freehold means that the owner owns the land and the building outright.
In the context of a condominium, each unit is owned by an individual leaseholder, while the common areas are owned by the condo corporation. When a section 98 agreement is exercised, the tenant has the opportunity to buy the freehold or extend the lease of their unit, effectively giving them more control over their property.
Why would someone pursue a section 98 agreement?
There are several reasons why a condo owner might pursue a section 98 agreement. For one, it can provide more control and autonomy over the property. By owning the freehold, the owner can make decisions about the property without having to consult the landlord or condo corporation. It can also increase the value of the property, as owning the freehold or having a longer lease can be more attractive to potential buyers.
Additionally, if the lease is close to the end of its term (typically under 80 years), it can become more difficult to sell the property. Buyers may be deterred by the short lease term, which can affect the property`s value. By extending the lease through a section 98 agreement, the property becomes more marketable and valuable.
What does a section 98 agreement entail?
A section 98 agreement typically involves several steps. First, the tenant must serve a section 98 notice to the landlord, indicating their intention to exercise their rights to buy the freehold or extend the lease. The landlord then has a set amount of time (usually two months) to respond.
If the landlord agrees to the terms, the two parties will negotiate and agree upon the purchase price or lease extension terms. If they cannot come to an agreement, the tenant can apply to the First-tier Tribunal (Property Chamber) to determine the terms of the agreement.
Once the terms are agreed upon, the tenant and landlord will sign a section 98 agreement, which outlines the terms of the sale or lease extension. The agreement is then registered with the Land Registry, making it a legally binding document.
In conclusion, a section 98 agreement can be an advantageous option for condo owners looking to gain more control over their property. By buying the freehold or extending the lease, owners can increase the value of their property and make decisions about it without the need for consultation. If you are considering a section 98 agreement, it is important to consult with a lawyer experienced in real estate and leasehold law to ensure that you fully understand the process and your options.
