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10 things you need to know about statutory lease extensions
09 May 2017

1. Check your title

To qualify for a lease extension you must have a long lease (more than 21 years) and need to have owned your flat for at least 2 years.

2. A premium is payable

You will be required to pay a premium to the landlord. This compensates the landlord for the loss of ground rent income and the fact that you will be extending your lease term by 90 years.

Online calculators can provide a very rough guide as to the appropriate premium payable but it is advisable to obtain a formal valuation.

The premium payable will increase as the existing lease term decreases. If your lease falls below 80 years “marriage value” will result in an additional payment being included in the premium.

In addition, at this stage flats with shorter leases often become more difficult to mortgage, and as such it is therefore important to consider your lease length prior to marketing your flat for sale.

3. You may need to pay a deposit

Once your notice (which starts the lease extension process) has been served on the landlord, they may request that you pay a deposit which is 10% of the premium proposed in your notice or £250.00, whichever is the greater. This has to be paid within 14 days of any request.

4. The landlord may request that you provide evidence of title

The landlord may also request that you provide evidence of your title to the flat. This must be provided within 21 days of the request.

5. Take care when selling your flat during the lease extension process

If you have served a statutory notice commencing the process for a lease extension and then decide to sell your flat, you will need to ensure the benefit of the notice is assigned to the buyer prior to completion of the sale. Failure to take this step will prevent the new buyer from continuing with the lease extension process as they will not have the requisite period of ownership and you will have wasted costs.

6. The Landlord is required to provide a counter notice

You will be required to provide a date in your notice, not less than 2 months’ from the date of your notice, by which the landlord must serve their counter notice. The landlord’s notice will outline whether the landlord accepts your claim for a lease extension and agrees with the terms proposed by you or alternatively, they will confirm the terms upon which they are willing to agree to a lease extension, which will usually include a higher premium figure.

7. Negotiation is key

You and the landlord will then negotiate (usually by way of surveyors or legal representatives) on the proposed lease terms, particularly the premium.

8. Tribunal involvement may be necessary

If it has not been possible to agree terms within 6 months of the landlord providing their counter notice, you will need to make an application to the Property Tribunal to protect your notice and request a determination as to the new lease terms.

9. The new lease

Once terms are agreed, the landlord’s solicitor will draft the lease extension deed which will then be negotiated by your solicitors. There are strict time limits for providing the draft lease and negotiations as to the drafting of the lease and it therefore important to instruct a solicitor to advise you.

10. A voluntary lease extension can be an alternative

You can try and negotiate a lease extension with the landlord without using the statutory process. It may be more cost effective and quicker. In addition, terms agreed can be more flexible but ultimately, if you cannot agree you will need to use the statutory extension process.

With a voluntary lease extension, often you will be at the mercy of the landlord in terms of premium and the amount of ground rent (and you need to be careful not to agree to high increases in ground rent in the future which can seriously damage the value and marketability of your flat). Whilst the statutory route may take anywhere between 4-12 months and may be more costly, you have more scope to negotiate the premium (and can apply to the Tribunal for determination on this) and ground rent will be reduced to a peppercorn. 

For more information about the issues raised in this article or to find out about how the Property Disputes team can help you please contact Laura Ford on 0118 952 7226 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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