The Lease Extension Guide: Part 6 – key points that leaseholders and landlords should note in relation to lease extensions

Key points that leaseholders and landlords should note, in relation to lease extensions: 

Part 1 – why should a leaseholder seek to extend their lease?

-          If the lease has less than 90 years left to run, the leaseholder should consider applying for a lease extension, as a short lease can be more difficult to sell or mortgage.

-          The lease extension premium will be considerably more if the unexpired term drops below 80 years due to marriage value.

 

Part 2 – who, how and on what new terms?

-          To be eligible for a lease extension, the leaseholder must have been the registered owner of the leasehold property for at least 2 years, if it is shared ownership then they must own 100%, and the lease when granted must have been for more than 21 years.

-          A lease extension may be agreed on an informal or statutory basis. 

-          With a statutory extension, the new lease will be the same terms as the existing lease subject to modernisation, for an additional 90 years, and the ground rent will be a peppercorn.  The premium payable will be a fair, market price.

 

Part 3 – the leaseholder’s Initial Notice requesting a new lease / extension.

-          The leaseholder serves the Initial Notice from which point they will be responsible for the landlord’s legal and valuation costs.

-          If the leaseholder decides to withdraw then they will be liable for the landlord’s costs incurred to date and they will not be able to serve another Initial Notice for 12 months.

-          The landlord can request a statutory deposit of 10% of the leaseholders proposed premium.

 

Part 4 – what happens after the Initial Notice?  An overview of the rest of the process.

-          The landlord has 2 months from the Initial Notice to serve a counter notice.  Or, if the landlord doesn’t respond then he is deemed to accept the terms in the Initial Notice.

-          The parties have 2 months from the counter notice to agree the premium, after which, either party could refer to the First-tier Tribunal (Property Chamber) (FTT) for a determination.

-          If the premium and new lease terms are not agreed within 6 months of the counter notice, the leaseholder must apply to the FTT otherwise their claim is deemed withdrawn.

-          Once matters are agreed, either by negotiations or through the FTT, a new lease is granted.

-          The new lease must be completed within 4 months of terms being agreed, or the leaseholder’s solicitor must make an application to the County Court to enforce this, or the leaseholder’s claim will be deemed withdrawn.

 

Part 5 – what can a leaseholder do if they are selling their flat?

-          If a leaseholder wants to sell their short lease, then it may be possible to commence the process for a lease extension and have the buyer take over the benefit of the lease extension claim and finish it off.  Care must be taken though – see part 5 for more detail.

 

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.