Why extend your lease?
Leases are what is known as a “diminishing asset”. This is because when you buy a lease it has a set number of years left to run and as time goes by this decreases. Once a lease has less than 80 years left to run it will cause difficulties when you come to re-mortgage the property, sell the property, and can dramatically increase the cost of a lease extension.
Voluntary Extensions
If the landlord and tenant have agreed to extend the lease then the process is straightforward. We can help you record this agreement or negotiate the terms of the extension before registering this with the Land Registry.
Statutory Extensions
The Leasehold Reform Housing, and Urban Development Act 1993 (as amended) enables tenants to extend their lease on set terms in return for paying the landlord a premium. The set terms are:
- Adding 90 years to the existing lease term;
- Reducing the ground rent to £0.00; and
- Minor modifications and updates as necessary.
The steps involved are:
- Initial Survey & Valuation – A valuation should be carried out first so that the tenant understands the potential costs involved.
- Tenant serves a S.42 Notice – The tenant serves notice upon the landlord specifying the terms of the requested lease extension and gives the landlord at least two months to reply.
- Landlord serves a S.45 Counter Notice – The landlord serves counter notice. They will either: accept the right to extend the lease, accept the right and dispute the proposed terms, or dispute the right.
- Negotiation – The parties then have period of at least two months to negotiate any outstanding issues.
- Application to Tribunal – If there are outstanding issues which cannot be resolved the parties can apply to the Tribunal within six months of the Counter Notice to determine the terms of the Lease.
Voluntary or Statutory?
If the terms of the extension are fully agreed then you should consider using the voluntary method to extend your lease. However, until the lease has been executed either party can decide to withdraw and would not face any consequences.
The statutory route offers more protection. There are clear rules and set timeframes which apply to both parties.
The terms of the lease extension are largely fixed meaning that both parties know at the outset what the outcome will be. The statutory route allows either party to apply to the Tribunal if there is a disagreement about the terms of the lease, something not available under the voluntary method. Finally, the statutory method commits both parties to the extension process and penalises any party which withdraws from the process after the initial notice is served.
How much does it cost to extend a lease?
Both sides will normally incur the cost of a professional surveyor to advise them of the potential premium payable and negotiate this figure with the other side.
Once the S.42 notice is served the tenant becomes liable for the landlord’s reasonable surveyors costs and reasonable legal costs (drafting the lease and checking the tenant’s right to claim a lease extension). The costs incurred in negotiating the terms of the lease or dealing with any application to the Tribunal are paid for by each party.
If the lease is being extended voluntarily the tenant will usually pay an agreed amount to cover the landlord’s costs.
The tenant will have to pay the premium to the landlord. Some mortgage lenders also charge a fee to the tenant before they will provide their consent to a lease extension.
How can Pinney Talfourd help?
Pinney Talfourd have experienced and specialist solicitors who regularly deal with the lease extension process, challenging extension claims, and representing clients in the First-tier Tribunal (Property Chamber).
We have established relationships with local surveyors who will be able to advise you on the premium payable and the best approach to take in negotiations.
We are experts in the field of enfranchisement and are committed to working with you to ensure you achieve the very best possible outcome.
Pinney Talfourd is an established member of the Association of Leasehold Enfranchisement Practitioners (ALEP). This means that we are trusted and accredited solicitors who can offer expert advice. It also means that we have access to a network of vetted professionals who we can assist with every stage of your matter.
