Tag Archives: Info for leaseholders

How can I extend my lease?

There are two ways that this can be done.  The first is to carry out a lease extension under the 1993 Act (provided you qualify, having owned the property for at least 2 years).  Provided that this is the case you will have the right to add 90 years to the unexpired term of your existing lease.  For instance if your lease currently has 65 years left to run your new lease will have 155 years.

Alternatively, you can negotiate with the freeholder directly for the sale of a lease extension which may be for varying lengths of term (e.g 125 years, 150 years, 999 years).  Each of these would need to be ‘priced’ appropriately and it is likely the freeholder would want to receive a ground rent.

Under the statutory extension of the lease there is no more ground rent to pay.  Assuming that your freeholder will not negotiate with you on a voluntary basis and if you want to have statutory control over the new lease terms and the premium, then it may be best to persue a claim for the new lease under the 1993 Act – assuming that you qualify.

How do I calculate the premium payable to extend my lease?

There is statutory method set out in schedule 13 of the 1993 Act which shows how the lease extension premium will be calculated if you are buying a plus 90 year extension on top of the existing term of your lease.  This applies under the 1993 Act only.

 This is not so much of a ‘formula’ as an approach to a professional valuation set out in words in the Act.  You will still need the services of a surveyor or valuer to advise the likely premium that you will pay.

 An approximate indication can be found by looking at a ‘lease extension calculator’ such as the one that appears on the Bishop and Sewell website: bishopandsewell.co.uk/lease-extension-calculator/

Such tools are an approximate guide only but will give you a rough idea of the premium to be paid to extend your lease.

Essentially the premium depends on 3 things: the length of the lease, the capital value of the flat and the amount of ground rent that is payable under the lease.

Without going into lots of detail, the calculation compensates the freeholder for the loss of ground rent income, reflects the capital value of the freehold when the lease expires (i.e reflects the right to receive the flat back when the lease expires) and also when the lease has less than 80 years to run also includes an additional factor called ‘marriage value’ which recognises the up lifting value which occurs when the lease is extended. This splits the ‘profit’ which occurs when this has happened between the landlord and the tenant 50:50 taking into account the ‘term and reversion’ elements already accounted for in working out the compensation of the loss of ground rent and the capital value of the freehold when the lease expires.

Can the landlord insist on making variations to the lease in a lease extension?

I am undertaking a lease extension. Can the landlord insist on making variations to the lease?

The short answer to this is ‘yes,’ if the variations are necessary modernisations and the extension is being carried out under the Statute.

The 1993 Act implies certain provisions will have to be included in the new lease (these relate to the landlord’s right to terminate the lease to redevelop the building at the expiry of the original contractual lease term). There are also certain other technical clauses which must be included.

More generally, the question of whether a term can be included or not depends on whether it would be reasonable to include the new term because of changes that have happened since the original lease was granted. The starting point is that the existing lease terms will remain the same, but there are circumstances (particularly in which the lease is defective or out of date) where it may be possible to argue for new clauses to be included.

If you are proceeding outside of the statue then the landlord can ask for whatever terms he would like in the new lease as there is no statutory control over the terms and unless both parties sign up to the process voluntarily the lease will not be extended.

How can I find out how much my lease extension will cost?

This is a question for a valuer or surveyor who specialises in this area, but if you know the lease length and the current value of the flat and the ground rent schedule, then you can have a go at working this out approximately by using one of the calculators available online, like this one:

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

These type of calculation tools come with a health warning as they are only approximate, and cannot consider the unique circumstances of your property, however they can be useful in deciding whether you can afford to go forward with the process, or more importantly if you are thinking about making an offer on a short lease property, what the likely cost will eventually be.