Category Archives: Lease Extensions

Information for leaseholders and freeholders about the process and costs of extending the lease on a leasehold property.

I am a freeholder. Do I have to grant a lease extension to the leaseholder?

There is no obligation to grant a lease extension to a leaseholder who simply asks for one.  However, if a notice is served by a qualifying leaseholder and followed through, then the leaseholder has a statutory right to compel the landlord to grant the lease extension to 90 years on top of the unexpired term.  If you fail to respond to the notice that is served, with a counter notice in the appropriate period then you are deemed to grant the lease extension at the premium proposed by the leaseholder.

Accordingly, if notice is served and followed through you will have to grant a lease extension to the flat owner.

If you are served with any kind of statutory notice then this should not be ignored as the consequences can be disastrous. If you are served with a notice under Section 13 or Section 42 of the Leasehold Reform Housing and Urban Development Act 1993, then your reasonable costs will be covered by the flat owner(s) serving the notice. You should therefore take professional advice as soon as possible.

What happens if we cannot agree on how much the lease extension should cost?

If the parties cannot agree on a statutory case, the matter is referred to the First Tier Tribunal of the Property Chamber and they will determine the price that is paid.  The Property Chamber is an ‘expert’ tribunal and can make its own assessment but will initially listen to the evidence submitted by both parties.  It is necessary to produce an expert valuation report and to provide expert evidence to the tribunal.

If you are progressing outside of the statute and cannot agree, then the best solution is to serve a notice and bring the matter within the statutory control of the 1993 Act. At the very least in this way you can ‘fix’ the valuation date at the date of the Notice, so that fluctuating property markets will not impact the price of your lease extension.

I want to extend my lease. Are there any additional costs payable other than the price of the lease extension?

If you want to extend your lease under the 1993 Act then the landlord’s reasonable legal and valuation costs will be payable by you (as well as your own).  You will not need to pay their costs in relation to any tribunal work, or in relation to any negotiation work carried out by the landlord’s surveyor or solicitor.

Often if you are agreeing a deal with the freeholder they will ask that their legal and valuation costs are paid on the basis that these would be paid under the statute.

Section 60 of the 1993 Act provides that the freeholder is able to recover the reasonable costs of checking the notice, serving counter notice and dealing with the conveyancing on the grant of the lease. The landlord’s reasonable costs of having a valuation report prepared to respond to the notice are also covered.

If you would like an approximate idea of the cost of extending your lease then there are some excellent calculators out there on the internet – such as this one:

http://www.bishopandsewell.co.uk/lease-extension-calculator/

These will only give an approximate idea, but if you are working out whether you can afford to extend your lease or not, or what the cost will be if you are buying then they can be very useful.

Link

The short answer is ‘No.’  It is not essential to use the 1993 Act to extend your lease.  It is possible to agree a lease extension by negotiation with the freeholder, however there are many factors to consider when looking at the Formal vs. Informal procedures.