Does the „option“ to extend the leasehold estate represent a risk?
The creation of a leasehold estate allows a developer to build and operate a property on someone else’s land. As a result of the registration of the leasehold estate in the Land Registry, such a building will belong to the developer and not to the owner of the land.
The leasehold estate is always registered for a fixed period of time (max. 99 years), but it is possible for the parties to negotiate an “option” to extend the leasehold estate at a later date.
But did you know that exercising such an “option” can be risky? In practice, even when an “option” is exercised, the Land Registry authorities require a new agreement between the developer and the landowner or a court decision. If the other party does not provide the necessary cooperation, the leasehold estate may not be registered in time and the building will pass to the landowner.
Therefore, be careful and pay close attention to the wording of the leasehold estate agreement!