Finding Your Way Through a Minefield! – A Guide to Extending Your Flat Lease

If you are a flat owner, you may not realise it (until you come to sell or re-mortgage) -  but if the remaining term of your lease is less than 70 years there is a very real risk that a potential buyer or lender will not proceed with the purchase or mortgage until the lease term has been extended.

In addition as the length of the lease term decreases so too does the value. Whilst this might be minimal at first, there will come a point in time when it becomes significant.  Whilst it might be tempting to put  off dealing with a matter that sounds many years away from being a problem, the longer you leave it, the higher the price you will ultimately have to pay to extend. This becomes particularly acute where there is 80 years or less left on the lease at the date of your notice requesting a lease extension.

Whilst the right is often referred to as a “right to a lease extension” it is actually an individual (rather than a collective) right to a new lease. The new lease you will be granted will be for a term of 90 years plus the remaining term on your existing lease, so for example if there is 70 years left on your current lease your new lease will be for a term of 160 years.

There is a further benefit in extending your lease in this way. Under your current lease you may be obliged to pay ground rent of say £200 per annum and there may be provision for this to increase over the life of the lease. Under your new lease the ground rent will be a peppercorn rent. The other terms of the new lease will generally be the same as your existing lease terms.

There are however some important qualifying criteria to bear in mind and there are also certain exceptions and situations where the right does not apply, for example leases in respect of Crown or National Trust properties or in respect of buildings within the precinct of a cathedral.

The main criteria you will need to comply with are:

• Your lease must be a long lease that is it must have originally been granted for a term exceeding 21 years.
• You must have owned the lease (and been registered as proprietor at the Land Registry) for at least 2 years before serving the notice requesting the lease extension. There is no longer any requirement for you to live in the flat so the right also extends to corporate tenants.
• Your Landlord must not be a charitable housing trust providing the flat for the purposes of it’s charitable functions.
• Your lease must not be a business tenancy.

Assuming that you and your existing lease meet the criteria, you should consult a specialist solicitor at an early stage because they will want to collect all the relevant  information together to ensure that when the notice of your application is served it is valid and correctly served and that you are able to comply with the deadlines set out in the legislation, particularly if the application is challenged by the Landlord.

You will also need to consider carefully the costs involved. These will include:

• The premium i.e. the money you will have to pay to the Landlord for him to grant you the extension. This is made up of 3 things namely;  the amount by which the open market value of the Landlord’s interest in the flat is reduced, the Landlord’s share of the marriage value and compensation for severance where the value of other property of the landlord is lowered as a consequence of the grant of an extended lease.
• Your own legal costs and disbursements.
• Your own formal valuation costs.
• The landlord’s reasonable legal and valuation costs and disbursements.

In most cases the only matter likely to be in dispute is the premium you will have to pay to the Landlord. For this reason we always recommend to clients that they instruct a valuer who specialises in these matters as you will need to be well prepared for any negotiation. Most cases are resolved by negotiation, but if not, again it is vital that you have instructed a solicitor who has the experience and expertise to represent you at the Leasehold Valuation Tribunal or Court –  the head of our Housing Team sits as a part time Lawyer Chair of the LVT.

The pathway to extending your flat lease may at first glance appear daunting and complex;  however the end result is well worth the effort. The key to any successful application is to take early specialist advice

If you are concerned as to how long may be left on your lease, are considering applying to your landlord to extend your lease or have any other leasehold enquiries, please call us on 0113 264 4414 or email us at property@emsleys.co.uk.