Two routes are available for homeowners interested in obtaining a lease extension premium. This is an informal lease extension or a statutory lease extension. In this blog I will address the typical process for statutory lease extension.
Under all leases, the lessee will be responsible not only for your own surveying and legal expenses in extending the lease, but also your freeholders costs as well.
Statutory Lease Extensions Explained
This is the right under statute for a statutory lease extension, which a 90 year extension to your original remaining term at nil ground rent provided that you are a qualifying lessee. To be a qualifying Lessee you have to meet the following criteria:
- Leasehold Ownership. You have to have owned the leasehold interest for at least 2 years
- Leasehold term. A long lease is, mainly, a lease for a term of years in excess of 21 years from when it was originally granted (this does not apply to the reaming unexpired term, but the original lease length).
Despite fulfilling the criteria, you would not be eligible for a statutory lease extension if:
- Housing Trusts. If the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions.
- Commercial Interests. It is a business or commercial lease.
If these criteria are fulfilled, then the route of a statutory lease extension is available for you.
Leasehold Renewal Process
A typical lease extension process would involve the following:
- Instruct a surveyor to carry out a lease extension valuation on your property, this will normally set out a fair and reasonable premium for a lease extension.
- It will also set out the level in which a section 42 notice should be served upon the landlord. This is a notice that sets out under statute that you are seeking a lease extension valuation. It also sets the valuation date as the date of the notice. This is very important, as more times elapses, the less the unexpired term thus resulting in a more expensive premium.
- The notice cannot be served by the surveyor; however it must be served by a competent solicitor.
- The landlord has a 2 month period to serve a counter notice, section 45 notice, this will either accept the proposed premium or reject the premium in the section 42 notice and state what they believe the premium should be with the lease extension.
- Lease extension’s have a degree of negotiation, as there are a number of variable factors and the lessee is typically looking to acquire the premium for the lowest figure, while the freeholder is seeking the highest possible figure.
- Typically once both notices have been served, each of the surveyors on both sides are instructed by their clients to negotiate the lease extension premium, looking to get the best deal for their party using the facts, the negotiation fees are payable by each of the parties. Unlike the valuations fees which are payable by the Lessee.
- Once the premium is agreed, which typically can be a 4-6 month period, the matter is passed onto the solicitors who will agree the new lease and with the transfer of funds the matter can be completed.
- If the premium is not agreed, in the allotted time period, the lessee can make an application to tribunal; this typically has an associated fee of £500+Vat through the solicitors.
- Each party will have to bear their own costs with professional fees and share the tribunal costs equally.
- The tribunal will consider the case bought forward by each of the surveyors and decided on the premium payable. This can be appealed; however this is a costly exercise.
Residential Lease Extensions in Guildford, Surrey and London
Perry Hill’s residential experts successfully help those looking to extend their residential lease. Our team can provide expert valuation services prior to the lease extension process. We are also happy to assist you in the negotiation stages of the lease extension process. To find out more about our residential lease extension team, get in touch here or call us on 01483 237333.
