Block of Flats
Bukola Obadun-Craigs - partner

Lease Extensions

The less time left on a lease, the less valuable the property becomes.  Because of this you may be considering extending your lease.  This is a common practice which at outset, because of the legal processes involved can seem daunting.

We have many years experience in guiding clients through the extension process and our talented team are on hand to answer any questions you may have.

In this section of the website we have highlighted some of the main issues, but please get in touch if you have any questions.

How do I extend my lease?

As the term of your lease decreases, it becomes harder to sell your leasehold title. The longer the remaining term of the lease, the easier it is to obtain a mortgage. In fact, lenders are less likely to lend against leases where the unexpired term is less than 80 years.

Extending your lease widens the market of buyers and makes your property more marketable.

Acquiring an extended lease is an individual right and you must have held your lease for two years or more.

Statutory process

The Leasehold Reform, Housing and Urban Development Act 1993 (“1993 Act”) allows all long leaseholders (leases for more than 21 years) the right to extend their lease.  There are certain steps you need to take.

Initial steps

  • Instruct specialist surveyor to advise on premium payable and negotiations with the freehold’s representatives (if applicable)
  • Prepare and serve section 42 Notice of Claim on your freeholder. 
  • The notice will include a specific date for the landlord to serve a counter notice. This must be at least 2 months from the date which the Notice of Claim is served
  • Your freeholder and their surveyor have the right to access the flat for the purpose of obtaining a valuation.
  • You will pay a 10% deposit on your proposed premium or a minimum of £250.

What happens next?

  • If the freeholder fails to serve a Counter Notice in reply, no later than 6 months after the Counter Notice was due to be served you must apply to the county court to determine the terms of the acquisition of the new lease as expressed in your Notice of Claim.
  • If the freeholder serves a Counter Notice and disputes your claim, they must state the reasons why they do not believe you had a right to acquire a new lease and must apply to the county court within 2 months of the Counter Notice for a declaration that you are not entitled to the lease extension.
  • If the freeholder rejects your Notice of Claim on redevelopment grounds, they must apply to the county court for an order that the right to a new lease shall not be exercised.
  • If the freeholder serves a Counter Notice admitting your right to a new lease but disputes the terms proposed, the freeholder’s surveyor and your surveyor will attempt to negotiate and agree the terms in dispute.  A claim can be initiated at any time providing that you satisfy the statutory criteria set out in the legislation.

Negotiations

  • If the negotiations are unsuccessful you can apply to the First Tier Tribunal (FTT) within 6 months. The FTT will determine the terms in dispute and the terms of the acquisition.
  • If negotiations are successful, the premium and terms of the new lease can be agreed and a new lease granted.

Voluntary Process

You can approach your freeholder to see whether they will be prepared to enter a voluntary lease extension. If so, you will not need to satisfy the criteria set out here and above.

Do I have the right to extend my lease?

In short yes, subject to the fulfilment of the statutory criteria – Statutory Lease Extension

The qualifying criteria for exercising the right are:

  • You must hold the property under a long lease.
  • The property must be a flat
  • You must have held the lease for a continuous period of two years prior to serving the notice which initiates the claim – A section 42 notice.

The right is exercisable by corporate bodies as well as by individuals.

What happens next?

  • On service of a valid s42 notice your landlord is bound to grant you a new lease and you are bound to accept it subject to compliance with the Leasehold Reform Housing and Urban Development Act 1993 and to your right to withdraw.
  • The term of the new lease is 90 years plus the remainder of the existing term, i.e., if 70 years remained on your current lease, a term of 160 years will be obtained and the ground rent is in effect extinguished by reducing it to a peppercorn.
  • Your right to extend your lease may be exercised again and again in the same way and therefore there is no bar on further applications to extend.

You can negotiate outside the statutory framework – known as a Voluntary Lease Extension

The Law Commission published its report on 21 July 2020 on leasehold reform. It included changes to the process of obtaining a lease extension, making it cheaper and simpler. It could be a good time for you to extend your lease. If you would like to know more please contact our specialist team who can take you through the possible benefits and alternative options available to you.

Should I extend my lease?

Because a lease is for a fixed period of time, it naturally gets shorter every year. Extend your lease can protect the value of the property as the shorter the lease, the less attractive it can be to potential purchasers and could influence the sale price.

A marriage value is payable where the lease has 80 years or less. This is noteworthy, particularly for higher value flats. The marriage value is the difference between the total of the value of your existing lease, the value of your landlords’ interest and of any intermediate interests in your flat prior to the grant of a new lease and the total of the value of those interest after the grant.

Extending a lease also gives you the opportunity to change any defects in the current lease such as:

  • Omission of other property included in your existing lease but not comprised in your flat.
  • Alterations/additions granted since your existing lease.
  • Where your property derives from more than one lease.
  • Exclusions on service charge and management structure of the building.

It’s also an opportunity to re-mortgage and can add and/or restore considerable value to your leasehold flat.

The Law Commission published its report on 21 July 2020 on leasehold reform. It included changes to the process of obtaining a lease extension, making it cheaper and simpler.

Extending your lease can be complex but our specialist team are here to help you through the process.

My landlord is missing - can I still extend my lease?

In short yes! You will first need to make an application to the County Court for a vesting order.

If the County Court decides that an order should be made the claim is transferred to the First Tier Tribunal to determine the price and other terms of the acquisition.

Procedure

  • Before making an application to the County Court for a vesting order, all reasonable efforts must be made to trace your landlord or to ascertain the identity of your landlord and have been unsuccessful.
  • You will need to provide evidence both to prove that you have the right to extend your lease and an effort has been made to trace your landlord, who cannot be found. The court can impose further steps to be made to trace your landlord.
  • Evidence of attempts to trace your landlord could include:
    • Landlords last known address(es)
    • Online searches on your landlord’s name or if a company, a general search to see where the name(s) appear.
    • Statements of any witness who has visited last known address(es)
    • Returned correspondence to landlords last known address(es)
    • Bounced back emails to landlords last known email address(es)
  • Once the court makes a vesting order it will refer the case to the FTT for terms to be determined. The FTT stands in the shoes of your landlord for assessing the correct premium price to pay so you must provide detailed valuation evidence from an expert surveyor.
  • A vesting order is one for the surrender of an existing lease and the grant of a new lease on terms to be decided by the FTT on a statutory basis as in the case of a standard claim.
  • The application for vesting order can be withdrawn at any time before the new lease is completed but if any step has been taken towards progressing the claim, permission from the court is required.

 

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