Lease Extensions

Leasehold Reform and Legal Rights
The Leasehold Reform, Housing, and Urban Development Act 1993 provides lessees with the right to surrender their existing lease and acquire a new one. The new lease mirrors the terms of the existing lease, with two notable exceptions: the new lease will be for a term expiring 90 years after the end date of the existing lease and will be at a ‘peppercorn’ ground rent, which effectively means no ground rent. This new lease requires the lessee to pay a premium to the landlord, calculated as per Section 13 of the Act. This premium compensates the landlord for the loss of ground rent and for not regaining possession of the property when the original lease expires.
Understanding the Process
Leases on ex-local authority flats are usually granted for 125 years. Historically, residential leases were for 99 years, but many modern leases now span 125 years or more. The majority of flats in England and Wales are held on long leases. A leasehold interest in a property is a diminishing asset; as the unexpired term of the lease shortens, the value of the property falls. Upon lease expiration, the property theoretically reverts to the landlord. Therefore, it is necessary to extend the lease well before this happens. This process differs significantly from house conveyancing.
Qualifying as a Tenant
For the Act’s purposes, a ‘long lease’ refers to an original lease term of more than 21 years. You must be a tenant of a flat, defined by the Act as part of a larger building, constructed or adapted for residential use, with at least part of it situated above or below another part of the building. This definition excludes leasehold houses, which are covered under different legislation. Once you confirm that you are a ‘Qualifying Tenant’ of a ‘Qualifying Flat’, the next step is to identify the landlord, usually the freeholder of the building.
The Initial Steps
Firstly, verify that you are a ‘Qualifying Tenant’ under the Leasehold Reform, Housing, and Urban Development Act 1993. To qualify, you must have owned a property with a long lease for at least two years, with the two-year period starting from when your ownership was registered at the Land Registry. After confirming your status, you should check the identity of your landlord. In some instances, you might pay ground rent directly to the freeholder; in others, you may deal with a management company.
Professional Assistance
Engaging a conveyancer or property solicitor is advisable, as they can guide you through these initial checks and the subsequent process. They can also assist if you cannot find the necessary information about your landlord. The Leasehold Reform, Housing, and Urban Development Act 1993 (Section 41) allows you to serve a notice on anyone receiving rent on behalf of the landlord, requiring them to provide the freeholder’s details. With this information, you can commence the formal process. Avoid negotiating informally with the freeholder, as you may lose legal protection if they later change their mind.
Commencing the Formal Process
Once you have the legal right to a new lease and the freeholder’s details, you can start the formal lease extension process. The process is formal and legal, necessitating adherence to specific procedures to ensure protection under the Act. Negotiating informally with the freeholder is risky, as it provides no legal safeguards if the freeholder changes their stance.
Professional Guidance
If you are considering applying for a lease extension, having an experienced house conveyancer is crucial. They can provide advice, ensure all paperwork is in order, and navigate the complexities of the process. For more information on how BRE can assist with your lease extension,
request a call-back today. We are here to guide you through the entire process, ensuring a seamless experience.
Why Act Now?
It’s prudent for leasehold flat owners to apply for a new lease sooner rather than later. As the existing lease term shortens, the premium for the new lease increases. Typically, the shorter the remaining term, the higher the premium. Acting early can save significant costs and provide peace of mind regarding the property’s future.