How to Extend a Lease: FAQs For Leaseholders and Freeholders
Why should I extend my lease?
A lease is the right to use the property for a period of time. As the lease gets shorter, the value of the lease decreases and it becomes more expensive to extend the lease. That’s why it’s often a good idea to increase the term of the lease. Sometimes it’s difficult to sell a property with a short lease because mortgage lenders may be reluctant to lend money on such properties.
How can I extend my lease?
A lease holder can either extend their lease using the Leasehold Reform, Housing and Urban Development Act 1993, if applicable or by private negotiation with their landlord.
When should I extend my lease?
When the lease drops below eighty years, the premium to extend the lease increases because marriage value becomes payable. Marriage value is the increase in value of the flat arising from the grant of the new lease. It is therefore recommended that the lease is extended before it drops below eighty years.
As a tenant, how do I know if I qualify for a lease extension?
Generally you would be a qualifying tenant if your lease was more than twenty one years when it was originally granted and you’ve been the registered owner of your flat for two years. You should note however that if your free holder is the crown, national trust or part of a building within a cathedral precinct, your flat might be excluded from the right to extend your lease but specialist advice should be taken. Shared ownership leases will not qualify unless they have stair cased to one hundred percent.
How long do I have to wait before I have the right to extend my lease?
Assuming you are a qualifying tenant in all other respects, you have the right to extend your lease once you have been the registered of the flat for two years. You don’t have to have lived there, just owned it.
By what length of time can I extend my lease?
The right under the Leasehold Reform, Housing and Urban Development Act 1993 is to add ninety years to what is left on your existing lease. For example, if you have seventy five years left on your lease, you will be given a new lease of one hundred and sixty five years. Alternatively you may be able to extend your lease to any number of years while negotiating with your landlord.
Will the ground rent increase after a lease extension?
If you’ve obtained a lease extension under the Leasehold Reform, Housing and Urban Development Act 1993, you’ll only have to pay a “peppercorn rent”, which will mean no ground rent at all. If you extend your lease by negotiation with your landlord, you may still have to pay ground rent depending on what you agree.
As a householder, how do I calculate the premium payable to extend the lease?
To calculate the premium payable, it’s advisable to obtain a valuation from a qualified surveyor who specializes in this area.
What happens if we cannot agree on how much the lease extension should be?
Where there is disagreement about what the lease extension should cost under the Leasehold Reform, Housing and Urban Development Act 1993, it’s possible to make an application to the First-tier Tribunal (the Property Chamber) to determine the price.
Other than the price of the lease extension, are there any additional costs payable?
Yes, there will be additional costs. You will be responsible for your Landlord’s Reasonable Costs. This is limited to legal and valuation costs. For example,
- The landlord’s valuation
- Legal costs of drawing up the new lease.
- Checking your right to make the claim for a lease extension.
You do not have to pay the landlord’s costs of going to the First-tier Tribunal (the Property Chamber).
Do I have to go through the Act to extend my lease?
No, you don’t have to go through the Act, you can negotiate informally with your landlord to extend your lease, either on the same terms as under the Act or on different terms. However, if you cannot agree with the terms and you haven’t gone through the Act, you will not be able to go to the First-tier Tribunal.
Does a leaseholder have a right to extend their lease?
Yes, provided that the leaseholder qualifies under the Leasehold Reform, Housing and Urban Development Act 1993 and has served the correct notice under Section 42 of the Act, they have a right to extend their lease.
As a freeholder how do I know what premium the leaseholder should pay to extend the lease?
To determine the premium, it’s advisable to obtain a valuation from a qualified surveyor who specializes in this area. The leaseholder is required under the Leasehold Reform, Housing and Urban Development Act 1993 to pay your Reasonable Valuation and Legal costs.
As a freeholder involved in a lease extension, will I need a solicitor?
It is advisable to have a solicitor:
- Check the validity of the leaseholder’s Section 42 application notice.
- To serve a counter notice within the specified time limits.
- Draft the new lease.
- Liaise with the leaseholder’s solicitor.
The leaseholder will be responsible for some of your legal costs. If the leaseholder thinks your costs are unreasonable, they can apply to the First-tier Tribunal (Property Chamber) for determination.
Will the terms of the new lease be the same as the terms of the old lease?
The terms of the new lease will generally be the same except for the length and the ground rent.
When a lease is extended, can the landlord insist on making variations?
If you are using the Leasehold Reform, Housing and Urban Development Act 1993, the landlord is permitted to make certain variations to the lease so long as they are in accordance with the provisions of Section 57 of the Act. If you are extending a lease by private negotiation, there are no rules because you are acting outside of the provisions of the Act. You can try to negotiate with the landlord if they insist on varying the lease. You can either accept their offer or proceed using the Act if applicable.
As a tenant how can extend my lease if the landlord is missing?
If the landlord is missing and you qualify under the Leasehold Reform, Housing and Urban Development Act 1993, you can apply to the County Court for an order to dispense with the service of the initial notice. This will mean that your lease can be extended by the court; however you’ll be required to demonstrate that you have made all reasonable attempts to locate the landlord. In some cases an Enquiry Agent may be useful to carry out a search and to produce a report which can be used as evidence that the landlord is indeed missing. It’s wise to seek advice from a solicitor both when investigating the landlord’s absence and the application to the County Court.
How can you find out who is the freeholder?
You can contact the Land Registry to find out who the registered freeholder is and if necessary obtain a copy of the freeholder title register.
If a freeholder serves a Section 42 notice but has not received a counter-notice what can they do?
In the Section 42 notice, you must specify a date for response of at least two months from the date of service of the notice. If your landlord does not respond or responds late, then you can apply to the County court for a lease extension on the terms set out in the Section 42 notice within six months from the date the County notice was supposed to be given.
A lease extension is proceeding under the Leasehold Reform, Housing and Urban Development Act 1993 terms have been agreed but it has not completed…..What can be done?
If a new lease has not been entered into within two months of the agreement, or First-tier Tribunal’s determination, either party can make an application to the County Court for an order to deal with the conclusion of the lease extension. This application must be made within two months of the initial two month period expiring.
Lease extension solicitors
If you would like to learn more about lease extensions, please contact one of our lease extensions solicitors in the Residential Conveyancing team at IBB Solicitors. Call us today on 01494 790013 or 01494 790071 or email email@example.com .
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