Lease Extension

A leaseholder has the statutory right to extend their lease by a further 90 years and the ground rent reducing to nil (£0) under the Leasehold Reform, Housing and Urban Development Act 1993.

In order to qualify to have the right to acquire a statutory lease extension the tenant must satisfy the following two conditions:

  1. They must have owned the flat for a minimum of 2 years; and

  2. The term at the start of the lease was for more than 21 years (not necessarily the start of your ownership of the lease).

The law allows a qualifying tenant the right to claim an extension of 90 years in addition to the term remaining on the present lease. The tenant is not entitled to vary this term unless an informal agreement is reached with the landlord.

The terms of the lease will be on the same terms as the existing lease, but the landlord will have certain additional redevelopment rights exercisable within 12 months before the expiration of the current lease term and within 5 years before the expiration of the extended lease. Although, the landlord and the tenant are entitled to make appropriate changes in order to update the document or to correct any defects that may exist in a poorly drafted lease.  

Making a Claim

Once a tenant has decided to proceed with the lease extension, the claim is started by serving a formal notice on the landlord.  

The suggested proposed premium to be entered in the notice for the lease extension must confirm the lowest possible price that the tenant is prepared to pay for the extended lease. This is NOT the final price for the lease extension, it is merely the starting point for negotiations with the freeholder.

It is imperative the tenant instructs an experienced surveyor/valuer who undertakes this type of work on a regular basis; we can put clients in touch with suitable surveyors who can provide a quotation for their services.

As soon as the notice has been served on the landlord, the landlord has the following rights:

  1. A right of access to the property in order to carry out an inspection to prepare a valuation for the purposes of responding with their counter notice;

  2. The right to request a 10% statutory deposit (being 10% of the price in the notice)

  3. The right to request evidence of title to the claim.

The landlord must then reply to the notice with their counter-notice within two months from the date of the notice stipulating the amount they are demanding for the lease extension (which usually can be negotiated downwards).

Upon receipt of a valid counter-notice from the landlord, a period of negotiations will then commence between the landlord’s surveyor and the tenant’s surveyor to agree the premium. The terms of the lease will also need to be agreed between the solicitors.

IF the premium or the terms of the new lease remain in dispute two months after the date of the counter-notice, then either the tenant or the landlord may apply to the First-tier Tribunal up to a long stop date of six months from the date of the counter-notice. The majority of cases are settled by amicable agreement between the parties.

Once the premium and the terms of the new lease are agreed there is a window of two months in which to complete and pay for the lease extension.

Timing

The timescale involved from start to finish invariably depends upon the parties and their willingness to accept a fair and reasonable price. It usually takes a minimum of six months even if the parties are keen to reach a reasonable agreement.