There are two options available for residential lease extension – one is for the leaseholder to enter into informal discussions with the landlord and achieve a mutually-favourable agreement for a lease extension.
The second option (provided the term of the lease is more than 21 years and the leaseholder has owned the property for more than two years) is that the lease can be extended formally by law.
Under formal lease extension laws an individual lessee has a statutory right to a lease extension for an additional 90 years at a zero rent. There is also a similar right for the lessee of a house but the maximum period is 50 years lease extension. The basic qualifying criteria for a lease extension are that the leaseholder must have a long lease (i.e. not less than 21 years) of a flat or a house and must have owned the property for at least 2 years. There may also be the opportunity to correct any mistakes in the original drafting of the lease. The informal agreement for a lease extension may be cheaper initially, but is likely to lead to a shorter lease extension and even an increase in ground rent payable.
The procedure for the formal route is that the tenants conveyancing solicitors will serve a preliminary notice to obtain information from your landlord (it is not a statutory requirement for a conveyancing solicitor to serve notice – but please see comments below about the danger of not using a conveyancing specialist). Your conveyancing solicitors will then serve the notice of claim which will state:
- Details of the property
- Details of the lease (evidencing that the tenant qualifies)
- The date for the landlord’s lease extension counter-notice; and
- The proposed premium for the lease extension
The landlord (or their conveyancing lawyer) will or should respond and probably require payment of a deposit equal to 10% of the premium offered. Most landlords will value the property/lease and serve a counter-notice which will state whether they accept or object to the claim.
If the landlord and tenant cannot reach to an agreement they can apply for the Leasehold Valuation Tribunal to ultimately determine the cost of the lease extension.
If the formal statutory route is followed, the cost of the lease extension is fixed at the date the lease extension notice is served on the landlord, making it attractive to act now as a number of industry experts are predicting that property prices will soon begin to rise again.
It is tempting (in the hope of saving fees) not to obtain independent specialist conveyancing/legal advice regarding the statutory procedures and professional negotiation of the lease extension premium. Ultimately not retaining specialist conveyancing and valuation advice is a false economy. There are very few exceptions to this and the sums involved are more likely to run to thousands than just hundreds.
The lease extension team at Fridaysmove property team has a wealth of conveyancing experience in advising landlord and tenant clients on lease extensions.
In England and Wales, you can get further advice about leasehold from as well as advice on lease extensions from :-
The Leasehold Advisory Service (LEASE)
31 Worship Street
Tel: 020 7374 5380 Or 0845 345 1993 (9. 30am to 3. 30pm Monday to Friday)
Fax: 020 7374 5373