Most properties in Gibraltar are owned on a leasehold basis, which in effect means you have the right to live in your home for a certain amount of time.
Now picture that you have owned your current property for a considerable number of years, paying your mortgage on time, month after month, year after year and one day you decide to place it on the market for sale, and when you check your lease, you realise that you have 60 years or less remaining.
If you own a property with a similar number of years remaining, you could surprisingly find yourself unable to sell it if the head-lessor refuses to grant you an extension to your lease.
Recently we encountered two situations where the owners could not sell their properties because the buyers’ lending institutions considered the unexpired term of the lease to be too short, and unfortunately the head-lessors in both instances would not grant a suitable extension.
In Gibraltar at present there is no obligation in law to compel a head-lessor to offer an extension of a residential lease to the owner of the unexpired term. That has serious implications for any homeowner with a lease of around 60 years or less and would mean that their “asset” actually drops in value if the head-lessor refuses to grant an extension.
Just as much of a concern is that even if the head-lessor does agree to extend a lease he is at liberty to demand whatever sum he wishes, and it is also at his discretion as to the length of the lease he will grant.
A similar unsatisfactory situation used to exist in the UK up until the passing of the Leasehold Reform Housing & Urban Development Act 1993 (as amended by subsequent Acts).
That Act gives the leaseholder a right to surrender their existing lease at any time and acquire a new lease for a term of 90 years over and above the existing term, so for example, if the present lease has 60 years left to run, then the new, extended lease would be on the same terms and conditions, but for 150 years. And, in return for granting the lease extension, the landlord is entitled to a premium based on a formula set out in the relevant Act as recompense for not getting possession of the property when the original lease expires.
It is significant that the 1993 Act also gives qualifying leasehold owners of apartments a collective right to buy the freehold of the building (collective enfranchisement) if certain conditions are met – allowing them to take control of their building and its running costs.
Buying a property is probably the biggest investment and financial commitment any person can make in their lifetime and with over 90% of properties in Gibraltar owned on a leasehold basis, more and more homeowners will find themselves at the mercy of their head-lessor in coming years.
To me it only seems fair and right that we enact legislation to protect owners and grant them the legal right to extend their lease or buy their head-lease and/or freehold at a fair market price to put an end to abuses and before the problem escalates.
Hopefully we will see the introduction of Gibraltar’s own Leasehold Reform Act in the not too distant future!