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Insights

Extending the lease of your flat

The Leasehold Reform Housing and Urban Development Act 1993 was introduced because the government of the time recognised that it was unfair that leases were effectively a wasting asset. 

Under the legislation, if you are the owner of a residential lease of a flat, you may be entitled to extend the term of your lease.  This can be a really good way of increasing the value of your leasehold asset, particularly if you are looking to sell your lease or re-mortgage. 

Broadly speaking, you will meet the criteria if:

  • You have owned your lease for at least two years; and
  • Your lease is a long lease (i.e. total term is more than 21 years, but note it does not matter how much of the term is left to run).

There are two ways that you can extend your lease: either by negotiation with your Landlord, or by using the Statutory Procedure. 

1. By Negotiation

Often, the most straightforward and cost effective way to obtain a lease extension is by negotiation with the Landlord. Having said that, sometimes a landlord will only agree to putting the lease back to 99 or 125 years (instead of granting the full 90 years on top of the unexpired term as below).

The main areas to be negotiated are the premium to be paid for the lease extension and the amount of additional years that are to be added to the Lease. The landlord may also take this opportunity to try to increase the ground rent. In addition, there may also be other terms of the Lease that need updating or varying and these can be agreed at this time. Once all of the terms have been agreed the parties enter into a Deed of Variation.

2. Statutory Procedure

If you meet the criteria under the legislation, you are entitled to a lease extension of 90 years on top of the unexpired term with no ground rent, for a premium.

It is important that you know from the outset that you will be able to afford the premium payable for the extension.  Therefore, the first step is to obtain a valuation report from a surveyor as to how much should be paid for the lease extension.  We have good relations with surveyors in the area, who are experienced in producing valuations for lease extensions and who are also willing to argue your case at the Leasehold Valuation Tribunal, if necessary. 

Once your valuer has produced a report, you should employ a qualified solicitor to assist you through the statutory procedure.  The Notice of Claim must be properly prepared and served on your landlord and any other interested parties.  The Notice will specify the premium recommended by your surveyor. 

Upon receiving your notice, the Landlord can require payment of a deposit of 10% of the premium that you are proposing.  The Landlord then has a period of two months to serve the Counternotice. In this the Landlord will insert the figure he wants to be paid for the lease extension.  It is usual that his figure will be significantly higher than the figure set out in your Notice, this is to allow for negotiation.

After both Notices have been served, the surveyors for each party have a further period of two months to try to negotiate an agreement on the premium.  For this reason, it is even more important that you choose a reliable surveyor in order to speed negotiations along. 

If the surveyors cannot reach an agreement within 6 months from the date of the counter notice then it will be necessary to make an application to the Leasehold Valuation Tribunal who will then decide what figure is payable. It is sometimes necessary for your valuer to attend in order to make representations about the premium. 

If your lease has fallen below 80 years’ unexpired, then something called marriage value is payable, which can significantly increase premium payable.  Therefore, if you are just on the cusp of falling below 80 years, it is worth starting the statutory procedure as soon as possible. 

If you are interested in extending your lease, or if you are a landlord who has received a query about lease extensions from a tenant, please contact Laura Thompson in the Property department on 01689 887835 or email laura.thompson@cwj.co.uk