By Rawdon Crozier, barrister from KBG Chambers and Ibraheem Dulmeer, Legal Adviser at LEASE

September 2017

This article first appeared in the RICS Property Journal.

Under the Leasehold Reform, Housing and Urban Development Act 1993, qualifying leaseholders can extend their term by 90 years and reduce the ground rent to nothing. A qualifying leaseholder is one who has owned a long lease – more than 21 years from the date of grant – for the preceding two years. A party who is purchasing the long lease may take the benefit of the right to extend, provided notice has been served by the qualifying tenant – i.e. the tenant selling – and such benefit has been assigned together with the assignment of the lease.

There are usually four stages in the process, although it is not essential to follow them.

Stage 1

Stage 2

Stage 3

The final stage

Be aware

Inaccuracies or misdescriptions in notices may lead to increased costs or affect their validity. Deemed withdrawal can occur in many circumstances, such as not making an application in time, assigning the lease without assigning the benefit of the notice, or not completing the extension within four months of agreeing terms.

For leases with less than 80 years left, the correct approach to valuation is in limbo following the granting of permission to appeal from the decision in Sloane Stanley Estate Trustees v Mundy [2016] UKUT 223 (LC).

Informal lease extensions can produce a commercially sensible solution for both parties. Landlords may negotiate an ongoing entitlement to ground rent that is more than nominal in return for a reduced premium, or other terms that would not be ordered under the Act.

Those advising leaseholders should be extremely wary about negotiating an extension without serving a notice and engaging the statutory scheme.
Even when short-term savings on the cost of an extension are offered, these may be offset and eclipsed by longer-term costs. When advising a leaseholder, calculate the respective short- and long-term costs of what is being offered.

Delaying service of the notice will lead to a later valuation date, which will generally increase the costs of an extension should negotiations fail. Advising leaseholders to serve a notice and seek an extension under the act will often be the most prudent course.

LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.

This website uses cookies to improve your experience. Tell me more Accept