What is a lease extension?
The law gives leaseholders of residential property the right to extend the Term of their leases.
If you purchase a leasehold property you do so for a fixed period that is stipulated in the lease, this is known as the “Term”. When the Term ends, the ownership of your property reverts to the landlord.
The remaining Term of a lease affects the value of the property: the shorter the lease, the less the property is worth. So, it is in your interest to either extend the Term of the lease before it expires.
We have a specialist team providing a range of legal services to commercial and private clients, including leasehold extensions. We know value for money is important so, we pride ourselves on top-level services at a fair price. We work to provide certainty by, wherever possible, agreeing a fixed fee upfront.
How can our lease extension solicitors help?
- Buying leasehold properties
- Preparing Deeds of covenant
- Dealing with Licences
- Supplementary lease work
- Landlords selling freehold to leaseholders
If you need help our specialists will assist Guy Osborn and Amber Larner-Bird
Does a landlord have to extend a lease?
There are two options when extending a lease – a voluntary agreement with your freeholder(s) or a statutory lease extension where you rely on the right to be able to extend your lease granted in the Leasehold Reform, Housing and Urban Development Act 1993.
A voluntary lease extension – involves you coming to an agreement with your freeholder in regards to the term and premium for extending your lease. There are no set terms the freeholder has to give you and their terms do not have to be “fair and reasonable”. In your circumstances, your freeholder may not be unreasonable or difficult to deal with. We would highlight that freeholders do not have to grant voluntary lease extension and a freeholder may simply say “no” or advise you to extend by serving a notice under the 1993 Act.
A statutory lease extension – as long as you have owned a property for over two years you have the right to extend your lease by 90 years and reduce your ground rent to £nil. As long as you meet the criteria for extending under the 1993 Act a freeholder must grant you a lease on 1993 Act terms.
Can my landlord refuse to extend a lease?
A landlord does not have to extend your lease on a voluntary basis (although they may agree to do so so it is usually best to at least approach your freeholder to make some initial enquiries). However as long as you meet the criteria for extending under the Leasehold Reform, Housing and Urban Development Act 1993 your landlord cannot refuse to extend your lease.
Do I need a solicitor to extend a lease?
Lease renewal or leasehold extension is a legal process. For this reason, it is advisable to seek advice from specialist lease extension solicitors, if you are considering undertaking a lease extension agreement. If an agreement cannot be reached with your landlord the terms may be decided by an application to the Property Tribunal.
In most circumstances, we usually advise that it is worth at least trying to agree terms voluntarily as it does often save money in terms of legal costs, however, it is also important to make sure you are getting a “good deal” and not being pushed to pay over the odds for your lease extension.
Lease Extension Process
The Leasehold Reform, Housing and Urban Development Act of 1993 gives the leaseholder a right to extend their lease by a further 90 years once they have owned the property for 2 years, however, a buyer may take advantage of the Sellers period of ownership and avoid waiting for 2 years.
If you proceed with a voluntary lease extension then the process is likely to be set by the freeholders themselves. When agreeing to the terms of the lease extension you may be asked to cover the costs of the freeholder’s valuation. Once the premium and terms of the extension are agreed the process involves a lease extension deed being drafted, checked, negotiated and completed. After completion, your lease extensions solicitors will also register the lease extension at Land Registry. If you have a mortgage over your property the lender’s consent will be required and a lease extension solicitor will be needed to act on the lender’s behalf.
If you proceed with a statutory lease extension then the process is more involved. Initially, a section 42 notice will be served on the freehold which notifies them that you are relying on your right to seek a lease extension. The section 42 notice will provide an opening offer on the premium payable for the extended term. The freeholders then have a period of two months to serve a counter-notice which will either admit or not admit your right to extend the lease and will either accept the offer made in the section 42 notice or propose a counter offer for a higher premium. There is then a period of 6 months to negotiate the premium and the terms of the new lease before a property tribunal application would need to be made. Once the premium and terms of the lease are agreed then the lease is completed and registered at Land Registry.
FREQUENTLY ASKED QUESTIONS
How much does it cost to extend a lease?
The first step in the lease extension process is having a valuation carried out to assess the likely premium payable. Even if you decide to proceed with a voluntary lease extension we would advise you to still take valuation advice to make sure the premium your freeholder is voluntarily offering is a “good deal”.
Instruct an experienced valuer in the enfranchisement field to get reliable advice. It is also important to highlight that when making an offer under the 1993 Act the offer must be a bona fide offer – i.e. a genuine offer. An expert valuer will be able to advise what offer should be made. You can use our lease extension calculator as a guide.
Is the lease extension process different if I already own a share of the freehold?
As freeholders, you are able to extend your leases out of the freehold to 999 years. The procedure involves a deed being drafted, agreed, signed by each leaseholder and director of the freehold company/each freeholder if the freehold is held in your names and then registered at the land registry. If you are looking to extend your lease as a freeholder or co-freeholder you should extend discussing your leases as a group as in practice you usually require each other’s consent and signatures.
Where can I obtain a copy of my lease?
If you need a copy lease and you have a mortgage on your property a copy can usually be obtained from your mortgage lender. Your freeholder may also have a copy of your lease and be able to provide you with this.
Alternatively, the Land Registry will hold a copy although a fee will be payable, please visit http://www.landregistry.gov.uk/.
For further information call Guy Osborn or Shilpa Mathuradas on 020 7485 8811. They will be happy to answer your questions.