Lease Extension FAQs

For some years the majority of residential flat leaseholders have had the right to extend their leases. There have been various legislative changes which have on the whole extended and simplified that right. That right is usually very valuable and should be considered sooner rather than later.

There is a similar right to extend the lease of a house but it is more common for the leaseholder to seek to acquire the freehold of a house rather than extend the lease. See FAQs Enfranchisement of a Leasehold House.

These FAQs on lease extensions are necessarily general in nature and you should not act or refrain from acting without taking specialist advice on your particular circumstances.

Q. Why go for a statutory extension of a long lease?
A. There has been no better time to exercise the right. The Government has considerably eased the qualifying criteria. In the present housing market and economy, it is unlikely, unless the law changes, that the process will become any cheaper. Property prices are continuing to rise and leases are getting shorter. As a lease becomes shorter it becomes more difficult to obtain a mortgage. Leases with only 60 to 70 years left to run will only be of interest on the whole, to restricted cash purchasers which shifts the bargaining position in favour of purchasers rather than sellers.

Q. What are the Qualifying Criteria?
A. The main ones are as follows and it should be noted that there are a number of exceptions and special situations:-

• The flat must be held under a long lease, i.e. one which was granted for a term of more than 21 years;
• The flat must have been owned by you for more than two years;

The law has been amended so that it is no longer necessary for you to have lived in the flat, only to have owned it for a period of two years;

Q. How much will I have to pay?
A. The valuation principles are complex and are primarily based on ground rents and yields and the length of the unexpired lease. It is very important to be aware if your lease has less than 80 years left at the date you serve your notice of claim on the landlord because a lease with less than 80 years to run will result in your having to pay an additional marriage value which can considerably increase the price.

Q. Do I need a valuer?
A. Generally it would be extremely unwise not to have a formal valuation or a valuer advising you in this specialist field. Even for negotiations you need to have an idea of how you are likely to pay and it is necessary to specify a price in the Initial Notice. If the price is unrealistic this could lead to your Notice being declared invalid.

Q. How long a lease extension will I get?
A. 90 years in addition to the unexpired term of your lease.

Q. Will I still have to pay ground rent?
A. The ground rent should be reduced to a peppercorn meaning that no ground rent should be payable for the whole of the term (e.g. the 90 years plus the present unexpired term).

Q. What other costs must I pay?
A. You will also have your professional costs which will be those of your solicitors and surveyors and, in some more complex cases which go to the LVT, possibly those of a barrister. If you do serve a Notice on the landlord then you will be liable for the reasonable costs of the landlord in connection with:-

• Any investigation the landlord is required to carry out;
• Landlord obtaining a valuation of your flat;
• Negotiating and granting a new lease to you;

There will also be the usual payments to third parties as with any conveyancing transaction, including Stamp Duty, Land Tax (depending on the price you pay), Land Registry fees and other incidental disbursements such as search fees.

Q. What happens if the Landlord disputes my entitlement to claim or we cannot agree on the price?
A. In the majority of cases the terms of the lease extension are resolved by negotiation between the valuers for each party. In those minority of cases where there is a dispute, either as to the amount of the price to be paid or the other terms of the lease extension, these can be referred to the Leasehold Valuation Tribunal. This can be a lengthy and expensive process. Although, as mentioned above, you are required to pay the reasonable costs of the Landlord, you are not liable for the costs of the Landlord in respect of any proceedings before the LVT, except where the LVT determines that an application should be dismissed, or one party has acted unreasonably in the proceedings.

Print this page