Simple guide for the lease extension process.

You can by law, extend the lease of any residential property, by law, providing the original term was in excess of 21 years, and the lessee has owned the flat for more than two years before making a claim to extend.

A lessee that qualifies can also serve Notice of a Claim to extend and then assign the Benefit of the Notice to the Purchaser or in the case of a deceased tenant the person responsible can make a claim, provided they do so, within two years from the date of probate.

There is also no limit to the number of flats that a lessee owns in a particular building, they can extend the leases of any or all of them, provided the qualifying criteria are met.

If a lessee qualifies they are entitled to acquire an additional 90 years on top of the existing lease. The lease will be on the same terms as the existing lease, except for certain permitted variations.

The premium for the extension is calculated as the sum of;

The value lost by the landlord, and any intermediate landlords as a result of the extension (loss of ground rent, and deferment of the reversion); 50% of the marriage value arising if the lease currently has less than 80 years unexpired, as a result of the extension of the lease; Compensation for any loss in the value of other property owned by the landlord or any intermediate leaseholders as a result of the extension, including the loss of any development value.

Aside from the premium that will be payable the lessee must also pay all reasonable legal and valuation costs incurred by the landlord or intermediate leaseholders in dealing with the claim.

The process can start by first serving a notice to obtain information, such information will be used in the prescribed forms when serving the notice to ensure it is served correctly.

Once the lessees have sufficient information it is important to first obtain valuation advice.

Notice of claim to include; A description of the Flat; information to establish that the lease qualifies; an offer of a reasonable premium; Terms of the new lease; A date when the Landlord must serve a Counter-Notice, being not less than two months of the date of the tenant’s Notice of Claim.

Best to use a specialist solicitor for preparing this notice.

The landlord is likely to respond requesting the payment of a 10% deposit of the premium offered, and requesting the tenant to deduce title.

Next the Landlord’s valuer is likely to inspect the flat, in order to undertake a valuation.

Within the stated period in the Notice, the Landlord must serve a Counter-Notice stating whether the Claim is admitted. If not, then the Tenant needs to decide whether to dispute the rejection through the Courts.

The Landlord can resist a Claim on the grounds of redevelopment. If the Claim is admitted, then the Counter Notice must state: Which of the proposals contained in the tenant’s Notice are acceptable and which are not; The Counter notice will often include a higher premium.

If either the terms of the lease or the premium remain in dispute two months following the date of the Counter-Notice, then either party can apply to the Leasehold Valuation Tribunal (LVT), for the matter in dispute to be determined.

Either party must claim within six months of the date of the Counter-Notice otherwise there is a deemed withdrawal, and the tenant will have to wait one year before being able to serve another Notice.

Any intermediate Landlord is at any time after service of the Counter-Notice by the Competent Landlord, entitled to serve a Notice to be Separately Represented in any legal proceedings.

Terms of the lease and the premium are either agreed, or determined by an LVT, or the Upper Tribunal (Lands Chamber), there is a right to appeal to the Upper Tribunal (Lands Chamber) on certain grounds, and within a prescribed period after a determination by a Leasehold Valuation Tribunal (LVT). Once agreed the conveyancing process is required to follow a statutory process / timetable.

The tenant can withdraw at any time, and there are provisions for the tenant’s Notice to be considered withdrawn, if strict time limits are not met. If the tenant withdraws, they are still required to pay the Landlord’s recoverable legal and valuation costs. If a deposit has been paid by the tenant this is refunded by the landlord plus interest but less the recoverable costs of the landlord.

There is no limit to how many times a lease can be extended, so long as the tenant pays the premium and the recoverable costs for each extension. One could add 90 years every 2 years!

Overseas purchasers often feel uncomfortable with the concept of leasehold property, in the absence of having a share of freehold leaseholders could always extend a number of times and end up with 360 plus years that would help in alleviate that concern from some wary purchasers.

If you need further advice please contact us.

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