This article will be useful for both long leaseholders looking to extend their leases, and landlords of residential property subject to such long leases. It will consider in more detail how a leaseholder can commence the statutory lease extension process, the consequences of serving the Initial Notice, and Part 4 will consider what happens after that.
A leaseholder who has less than 90 years left to run on their lease should consider applying for a lease extension. Failure to do so could make the lease more difficult to sell or mortgage, and as the remaining term reduces, the premium payable for an extension will increase.
How does a leaseholder commence the statutory lease extension process?
The first thing a leaseholder will need to do is appoint a specialist leasehold enfranchisement solicitor who will be able to assist with the legal aspects, this can be complicated and there are many pitfalls to avoid. We can assist leaseholders with this.
Next, the leaseholder will need to obtain a valuation of how much it is likely to cost them to extend their lease. We have many specialist surveyors who are experts in lease extensions who we can recommend. The leaseholders surveyor will provide them with a best and worst case scenario price for the lease extension to enable the leaseholder to budget accordingly.
Once the leaseholder has the valuation report, the solicitor can serve whats called an Initial Notice in the prescribed form on the landlord.
Consequences of serving the Initial Notice
The leaseholder will be responsible for their own legal and valuation costs, and they will also be responsible for their landlords / the freeholders legal and valuation costs from the point of serving the Initial Notice. However, this does not apply to all of the landlords costs – a leaseholder is not liable to pay the landlords costs of negotiation of the premium or his costs of appearing before the First-tier Tribunal (Property Chamber) (FTT) if the terms of the new lease cannot be agreed.
The landlords costs must be reasonable and the FTT can rule that they are unreasonable.
If the leaseholder decides to withdraw from the claim, then they will be liable for the landlords costs incurred up to the date of withdrawal. If the leaseholder withdraws, they also will not be able to serve another notice for a period of 12 months from the date of withdrawal.
Following receipt of the Initial Notice, the landlord is then entitled to ask for a statutory deposit which represents 10% of the proposed price stated in that Initial Notice. This is payable within 14 days of request.
Next steps: what happens after serving the Initial Notice
The next stage is for the landlord to serve a counter notice. Read more here.
We are experts in this area and we have an experienced Residential Property team and Property disputes team who can assist leaseholders and landlords with lease extension and lease enfranchisement matters.
