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Readers’ forum: Does extending a lease create a capital gain?

07 November 2022
Issue: 4864 / Categories: Forum & Feedback
Lease extensions

I am the owner of one of four leasehold flats in a converted Victorian (London) house. Each flat is worth well over £1m. There are leases from the freeholder.

About 12 years ago the owners got together and bought the freehold of the building through a new company limited by guarantee. Each flat owner is a member. The company has never had any financial activity at all since incorporation and simply owns the freehold.

The existing leases never touched since the acquisition of the freehold are now getting a bit short for mortgage companies if and when any of the flats is sold. So far so good but in anticipation of problems ahead the flat owners would like to extend their leases and thereby remove any future problem – just bring them up to date (they are quite elderly) and substantially increase the term. There...

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