Lease Extensions

Arcadia Law has considerable experience in advising both leaseholders and freeholders on all aspects of the Leasehold Reform Legislation and in particular the individual’s right to extend their lease under the Leasehold Reform Housing and Urban Development Act 1993 (‘the 1993 Act’).

Whilst the below advice note focuses on the process involved for a Leaseholder who wants to extend their Lease, we can also assist Freeholders. If you are a Freeholder and have received a claim from a Leaseholder to extend their Lease, we can help you with the process from responding to the claim up to completion of the matter.

Why extend your Lease?

Your Lease is essentially a depreciating asset, as the number of years left on the lease starts to fall, so does the value of the property. The shorter the Lease is on your flat, the more difficult it becomes to sell and the majority of mortgage lenders will refuse to lend on properties with a lease term of less than 70 years. It is very important that you consider extending your lease before it gets to this stage.

When considering a lease extension, the key figure to remember is 80 years, as once a Lease drops below 80 years, the premium payable to the Landlord will significantly increase as something called ‘marriage value’ will become payable.

Do I qualify?

If you have owned your flat for at least 2 years (there is no requirement to have lived there for any amount of time) and the lease was originally granted for a minimum of 21 years then you are likely to qualify for a statutory lease extension. This legal right will entitle you to a 90 year extension on the current unexpired term of your lease in addition to the ground rent being reduced to a peppercorn from the date of completion. The Landlord will then be entitled to a premium and more details about this can be found below.

If you have not owned your flat for a period of at least two years, you may still be able to extend your lease by agreeing a voluntary deal with your Landlord and this is something that we can help you with also.

Process

Once we have carried out an in depth assessment to check whether you are able to extend your lease, we will start with serving the statutory section 42 Notice on your Landlord. This Notice will contain the terms that you wish to extend your Lease for, including the premium payable.

Once the Notice is served on your Landlord, they will have a period of 2 months to respond with a Counter Notice which will include their counter proposals on the terms of the Lease and the premium.

Both parties then have a period of 6 months to agree the terms of the Lease and the premium and if this cannot be done, the matter will need to be referred to the First Tier Tribunal in order to have the outstanding matter determined. If neither party makes the application to the Tribunal before the 6 months period expires, and the terms of the Lease are not agreed, the matter will be deemed withdrawn. Given the consequences mentioned above, it is very important that specialist solicitors are instructed to represent you as there are many pitfalls within the Leasehold Reform Legislation.

Once all terms have been agreed between the parties or determined by the Tribunal, the parties have 4 months in which to proceed to completion. The whole process can therefore take between 6-12 months.

Premium payable

The premium payable is based on the principles contained in the 1993 Act but essentially is a combination of the following:

• Landlord’s loss of ground rent
• Landlord’s loss of reversion to the flat- this is delayed by 90 years once the lease is extended
• 50% of the marriage value- if the lease is less than 80 years

Arcadia Law regularly works with a number of experienced surveyors who also specialise in the area of Leasehold Reform and we are able to provide you with contact details of these surveyors if required. Your surveyor will be able to advise you on the likely premium payable to the Landlord and will work closely with us throughout the process.

Costs

You will be responsible for your own legal and surveyors fees as well as the reasonable legal and surveyor’s fees of your Landlord. Arcadia Law aims to provide their clients with a fixed fee which will be based on the individual facts of your matter.

Buying and Selling

If you are considering buying a flat which needs to be extended, the Seller can start the Lease Extension claim and this can then be assigned to the purchaser so it may not be necessary to wait for 2 years before you can extend your lease. In the same way, if you are selling your property, you may not need to continue the process until completion as this can be assigned to the purchaser. It is essential that you instruct solicitors who are experienced in dealing with these types of claims as the assignment must be dealt with correctly.

Fees