Lease extension with ease
Helen C owns a flat in a block in Chester. Ms C and the other leaseholders wanted to extend their...
The Leasehold Reform Housing & Urban Development Act 1993 (as amended)
The two routes
This Fact sheet focuses on the formal, statutory route, to extend your lease. It is possible to try and agree a lease extension with your landlord by negotiation, before applying under the statutory route, please see the article on “Lease extension, the two routes” on our website.
You must be a long leaseholder of a flat, or maisonette, (that is, in excess of 21 years when first granted) and have owned the property for at least 2 years. (Residence is not necessary).
The right is exercisable against most landlords, be they private, council or housing association. A shared ownership leaseholder is not classified as holding a long lease unless they have “staircased “up to 100% ownership .However the Housing Association may still be prepared to extend the lease anyway ,you should check with your landlord on their policy..
Certain properties are excluded from the right to a new lease. These include National Trust properties and Crown property, although the latter may still be prepared to follow the Act as if it applied to them.
Under the statutory route, the qualifying leaseholder has the right to add 90 years on to what is left on their existing lease at a peppercorn rent. (No ground rent)
The Act contains detailed provisions as to how the premium (price) is to be calculated to extend the lease. A surveyor/valuer who specialises in this area will use these to assess approximate figures as to how much you may have to pay to extend your lease.
If a lease has fallen below 80 years this will increase the cost of extending the lease as something called “marriage value” is payable to the landlord. This is why it is important for leaseholders to consider extending their lease before it drops below this length of years…
There is a calculator on the LEASE website which can be used to give an estimate of the premium, subject to the information you enter.
The Notice to the Landlord (section 42 notice)
This is the formal application to extend the lease in which the leaseholder will put the terms they are proposing to the landlord, mainly the premium. It is advisable to use a solicitor to draft and serve this notice, as it is a technical document and it is important to get it right.
The landlord has 2 months to respond to the Section 42 notice by serving a formal counter-notice stating whether they accept the leaseholder has the right to extend his lease and, if so, whether he agrees the terms. The landlord can have their own valuation at the leaseholder`s expense and will state their counter-offer in the counter-notice.
If the landlord disputes that the leaseholder has the right to a new lease, it may be necessary to apply to the County Court to determine that they have such a right.
If the landlord disputes the proposed terms, usually the premium, there is a further 2 months from the date of the counter-notice to negotiate. If the parties have not agreed on the premium by the end of this period there is then a “window” of 4 months in which either party can apply to the appropriate Tribunal to determine the premium. They can still continue to negotiate during this period.
In England the appropriate Tribunal is the First-tier Tribunal (Property Chamber); in Wales it is the Leasehold Valuation Tribunal..
It is important for the leaseholder to make an application to the appropriate Tribunal within the time period mentioned above, if terms have not been agreed. Failure to do so will mean there has been a deemed withdrawal of their application and will have to wait a further year before they can serve another. The leaseholder will also have to pay the landlord`s reasonable costs down to the date of deemed withdrawal.
Application to the Tribunal
As mentioned above, either party can apply to the appropriate Tribunal to determine the terms of the new lease .In most cases this is about the amount of the premium to be paid. The Tribunal will hear evidence from both parties` valuers as to how they reached the figure for the premium. They will then make a determination.
Once the terms have been agreed, or decided by the appropriate Tribunal, the parties have 2 months to enter into the new lease. If the lease has not been entered into during this time, either party can apply to the County Court, within a further 2 months, to require the other to enter into the new lease on those terms.
The Act requires the leaseholder to pay the landlord`s reasonable legal and surveyor`s costs for some work associated with the process. Each party pays their own professional fees of going to the Tribunal. It is possible to apply to the appropriate Tribunal to determine whether the fees of the landlord are reasonable, if the leaseholder considers them excessive.
The leaseholder, obviously, has to pay their own legal and surveyor`s costs as well.
The above is a brief outline of the process. Please see the advice guide on our website on Lease extension, getting started for more details.
Note: – The Law Commission is proposing to look into the process, and cost, of lease extension as part of the government`s review of leasehold practices .. It is not possible at present to say what the result of this will be, or when any new legislation will be introduced.