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Lease extensions: why you should consider extending the lease of your flat


Legal Updates, Property

If you own a long lease of a flat which has less than 80 years left, then you should consider applying to the Landlord to request an extension of your lease. Many mortgage lenders will not accept a lease of 70 years or less thus having an impact on the value and marketability of your property.

What right do I have to extend the lease of my flat?

The Leasehold Reform, Housing and Urban Development Act 1993, as amended (“the Act”) provides leaseholders of flats with a right to extend their lease, subject to certain qualifying criteria being met. For example, the lease must be a long lease, granted for 21 years or more and the tenant must have owned the lease for at least two years before serving the notice requesting a lease extension. Ideally you should contact a solicitor as early as possible so that they can check whether you and your building qualify under the Act.

What are the terms on which I can extend the lease of my flat?

Under the Act the new lease will be for a term of 90 years (plus the unexpired remaining term of the existing lease). The rent in the new lease is to be a nominal figure such as £1, often referred to as a  peppercorn rent. The lease is generally to be on the same terms as the existing lease.

What is the cost of extending my lease?

The Landlord is entitled to charge a premium for extending the lease under the Act. The Act provides for a calculation for determining the premium payable. It is advisable to contact a surveyor who specialises in Leasehold Enfranchisement to provide you with an opinion as to the likely premium payable (they will usually provide an upper and lower cost range). It is common for the Tenant to insert the lower figure of the range provided into the Initial Notice to the Landlord requesting the lease extension and this is the starting point for negotiations.

A statutory deposit of 10% of the premium quoted in the initial notice (or £250 whichever is the greater) is usually payable to the Landlord once the initial notice has been served.

There are likely to be further costs in addition to the premium payable including (but not necessarily limited to) legal costs, Land Registry Fees and in some instances, there may also be Stamp Duty Land Tax payable. These costs will need to be considered and balanced against the potential increase in value of the extended lease.

What is the procedure for extending my lease?

Once you have obtained a valuation of the premium from your surveyor, your solicitor will prepare the Initial Notice which initiates the Claim under the Act. Once a valid Notice is served it triggers a strict timetable.

What if the Landlord and Tenant wish to negotiate outside the Act?

It is open to the Landlord and Tenant to negotiate the terms of a lease extension without invoking the statutory procedure. This could provide for a longer lease extension than the statutory 90 years (plus the unexpired lease term) under the Act, however the Tenant should also consider that the Landlord could set other terms and increase the ground rent.

What about the freehold?

There is a collective right under the Act for tenants of long leases of 21 years or more to purchase the freehold of the building of which the flat forms part, subject to qualifying criteria being met. This is often referred to as collective enfranchisement.

In addition, the Landlord and Tenant Act 1987 (as amended) also gives tenants with long leases of flats a collective right of first refusal if the Landlord sells his freehold interest in the building and it allows qualifying tenants a right to purchase that interest.

This is a complex area and it is important to get advice as early as possible in the transaction.

If you are a Landlord who has received a Notice from a Tenant or a Tenant who wishes to extend their lease then please contact our property solicitor, Aashish Soni at Hatch Brenner on 01603 660 811 or by e-mail at aashishsoni@hatchbrenner.co.uk and he will be able to answer your queries and guide you through the process.

Aashish Soni Commercial Property Solicitor in Norwich

Property Solicitor Aashish Soni

If you would like further information about any service, call us on 01603 214220