What is a Lease Extension?
Under the 1993 Leasehold Reform Act (as amended) tenants were granted the right to require their Landlord to grant them a new lease for a term of 90 years, plus the present unexpired term of their lease, all at a peppercorn rent.
The procedure is initiated by the service of a notice by the Tenant to the Landlord informing them that they are exercising their rights. However before the Tenant serves the notice they will need to undertake a large amount of preparation.
Questions to bear in mind include:
Am I a qualifying leaseholder?
In order to be a qualifying Leaseholder you must have owned a Long Lease for a period of two years or more
Who is the correct landlord to serve the notice on?
In most cases the immediate landlord will be the freeholder, and therefore the obvious person for you to serve your Notice on. However, there will be cases where the immediate landlord possesses an intermediate lease which is too short to grant the ninety year extension. In these cases the correct landlord will be a party with a sufficient interest to be able to grant the extension.
What premium shall I state in my notice?
Whilst not a legislative requirement Setfords strongly advise clients contemplating a Lease Extension to appoint a surveyor to value the costs of the Lease Extension.
The valuer should be able to provide a "best and worst" figure, valuing from both the leaseholder's and the landlord's perspective and, from local experience, anticipating areas of claim and counter-claim. There is no such thing as a finite, fixed, price for a new lease and client’s need to be aware of the likely range within which the price will be settled, so as not to be surprised at a later stage.
In considering the likely premium you should also bear in mind that in addition to your own legal and surveyors costs you will be responsible for the Landlord’s reasonable Legal and surveyors costs except for those incurred in preparing for the LVT
Once all the information has been acquired the notice can be prepared and served on the Landlord.
The service of the notice triggers the statutory procedures for acquiring the new lease and you are liable for the landlord's reasonable costs as from the date he received the Notice. The service of the Tenant's Notice also fixes the "valuation date" as the same date as the Notice
Your Landlord will then have 21 days in which to request further information and then either:
- agree your right to the new lease and accept your terms (or propose alternative terms) or
- not admit your right and give reasons, which will need to be determined by the county court or
- claim right of redevelopment.; the landlord can refuse to grant the new lease if he can prove to a court that he intends to demolish and redevelop the building. This only applies to applications where the remaining period of the lease is less than five years from the date when the notice was served.
The most common result is that the Landlord will accept your claim but disagree over the premium and instruct his own surveyors. If an agreement can not be reached within 6 months either party can apply to the Leasehold Valuation Tribunal for a determination of the points at issue.
After Service of Your notice
Once the Landlord has received your notice he may ask at any time ask you for a deposit of 10% or £250 whichever is the greater.
As soon as the notice has been served on the Landlord you may assign your rights under it to a buyer, which can be especially useful if the reason for the application is that the short term of the Lease is making it hard if not impossible to sell.
We hope this guide has been of assistance in giving you some idea of the process involved, obviously every case is different and there are many aspects that this article does not cover, but for further information please contact info@setfords.co.uk or call 01483 408780.
