Leasehold property – extending your lease

Your guide to a lease extension Your guide to a lease extension

The idea of a leaseholder extending a lease for their property which has got say 82 years left to run may seem pointless. However, letting the lease fall below 80 years can cause vast problems.

Words by Mark Fagan - Winston Solicitors

A leaseholder may experience problems should they wish to sell or remortgage the property. This in turn can be costly as a premium which is payable to the freeholder to extend the lease is greatly increased once the lease gets below 80 years.

To be eligible to apply for a lease extension a leaseholder must pass certain criteria one such element being that they have been the registered owner of the property for 2 years.

Providing the leaseholder is entitled to extend their lease a formal notice needs to be served on the landlord. It is imperative that this notice is in the correct form as failure to serve a correct notice will deem the notice invalid which will ultimately cost time and money.

Premiums

Part of the information that needs to be contained in the notice is what the leaseholder is prepared to pay by way of a premium to the landlord. The landlord is entitled to this premium and the premium is calculated based on the formula set out in the Leasehold Reform Housing and Urban Development Act 1993.

The premium is the biggest point of contention between parties and is where most of the arguments arise. It is advisable for a leaseholder to instruct a relevant surveyor to calculate the premium. This is then inserted into the notice and served on the landlord.

Following service of the notice on the landlord, the landlord will either agree that the leaseholder has a right to a new lease and accept the terms as set out in their notice, agree to the lease extension but put forward different terms, or dispute that the leaseholder has a right to a lease extension. The landlord should provide the reasons for this. However, obtaining professional advice at the outset should prevent any such argument arising.

A final option open to the landlord is in the event the landlord is intending to demolish and redevelop the building. If he is intending to do so the landlord can claim right of redevelopment. However he must be able to prove that he intends to demolish and redevelop the building.

The landlord will put forward one of the above by way of a counter-notice. If the landlord does agree to extend your lease but the parties cannot agree on the terms then the leaseholder can apply to the tribunal to settle the dispute. An application must not be made to a tribunal before 2 months has expired from the date the counter-notice is served. However, proceedings must be brought within 6 months of the date of service of the counter-notice.

Finally, the extension of the lease is a period of 90 years in addition to the unexpired term of the lease.

On the basis that the leaseholder is eligible to apply for a lease extension the procedure in short is as follows:

1. The leaseholder serves the relevant notice on the landlord;
2. The landlord may request additional information but must do so within 28 days of receipt of the leaseholder’s notice;
3. The leaseholder must respond to the request for additional information within 21 days;
4. The landlord must serve a counter-notice no sooner than 2 months but no later than 6 months from the date of service of the counter-notice;
5. If the matter goes to tribunal this is decided after 28 days;
6. Upon the tribunal giving its decision the landlord must provide a draft lease within 14 days;
7. The parties then have a period of 2 months after the decision within which to enter into the new lease;
8. If the periods above elapse without a new lease being entered into then the tenant must apply to court within a further 2 months requiring the landlord to meet his obligations.

The above is a whistle-stop tour of obtaining a lease extension for a residential property.

If you would like further information on this please contact Mark Fagan, Partner, Dispute Resolution Department at Winston Solicitors LLP, 112 Street Lane, Leeds LS8 2AL. www.winstonsolicitors.co.uk/team/mark-fagan