What to do with Wellcome Trust leases ending in 3 years, perfect if world does end this year
Wednesday, August 01, 2012 by Ed Mead
According to various people/civilisations/conspiracy theorists the world will not be here beyond 22 December this year. If true it renders any huge property purchases a complete waste of time…….unless. One of London’s finest residential areas, close to Harrods and Knightsbridge and equally close to Sloane Square and the King’s Road, is on an Estate now owned by the Wellcome Trust, a vast hugely wealthy faceless multi-national. The amazing thing about the original leases in these areas, principally Egerton Gardens and Lennox Gardens, is that at least 10% of them are still held on leases that end in September 2015. Just in case you didn’t read that right that’s c. 3 years. There are always a few of these leases for sale, usually for c. £300 for every square foot, and if you’re worried about the end of the world these would seem suitably apposite purchases rather than spending more than £2000 for every square foot of such space on a long lease.
If you’re not so sure mother Earth is about to disappear you might, rightly perhaps, feel that it’s a bit of a punt even if you can hedge your bets and then purchase an extension post 22 Dec 2012 as the law allows.
But there is a darker story lurking within. In the 90s the law appertaining to such leases was changed. It allowed you to extend your lease BUT at the cost of longer remaining in your property as a sitting tenant paying a low rent if you didn’t want to extend. If your lease ends now you still have the right to extend it, at huge cost obviously, and you can stay in it as a tenant with certain rights BUT paying a market rent rather than a low rent as before. This is a lovely law if you’re a rich foreigner buying your lease now and extending after two years, or taking advantage of the existing seller’s ownership to start the process of extending the lease and passing it to you as you buy. However, there are many such leases that are owned by elderly English people who have remained living in these flats as their younger siblings have taken over Country piles or who have fallen on hard times. Either way most cannot afford to extend their lease, and they’ll not be able to afford the market rents they’re expected to pay either.
So, having paid their lifetime service charges and ground rents and perhaps occupied a building for decades their rights are no more entrenched than anyone else who may be moving into the same building having contributed nothing.
This is something of an [in my view iniquitous] anomaly, and assuming the conspiracy theorists are wrong and the world doesn’t end before Christmas this year some very rich landlords are going to be soon faced with a potential PR disaster. It’ll be interesting to see how they handle it.