Residential Lease Extensions

The Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) gives the leasehold tenants of flats the right to acquire a new lease on the payment of a premium subject to the fulfilment of the statutory criteria (the Formal Route) or by asking the freeholder to negotiate a new lease (the Informal Route). The exercise of this right is more commonly known as a lease extension
claim.

Informal route

Under the informal route, a leaseholder can approach the freeholder to ask whether they will negotiate a lease extension.

There is no obligation on the freeholder to respond or even agree to the lease extension. If the freeholder does agree, the parties will negotiate.

Starting the process informally could save time and money.

However, there are risks with going down this route, as the freeholder may only agree to extend the lease by including onerous terms in the lease or for a high premium.

Formal route

Under the formal route, which will be described further below, offers more protection for a leaseholder. However, there is a procedure and strict timescales that must be followed.

The right under the formal route is to add 90 years to what is left on the existing lease at a ‘peppercorn rent’, which means that no ground rent is paid.

However, the landlord is entitled to a premium for extending the lease, which is based on a formula set out in the 1993 Act.

The procedure for extending your lease is set out in the 1993 Act and it has strict timescales.

The first step would be to serve a section 42 notice.

However, to do this you will need to have instructed a surveyor to determine the valuation as a valuation needs to be included in the notice.

Once the section 42 notice has been served, it has the consequences of you not being able to serve another notice whilst that one is in force.

If the notice is withdrawn, no further notice can be given for a period of 12 months.

You (and any joint leaseholders) should sign the notice.

Case law has suggested that you can authorise an agent to sign the notice.

You can serve the notice in person or post it to the landlord’s last known address in England and Wales.

If the landlord admits your claim in the notice in reply, the procedure to follow is governed by the regulations, which set out the conditions of sale. These apply as well as the negotiations to agree the price. If the price and terms are not agreed between 2 months and 6 months after the service of the counter-notice either party may apply to the First-Tier Tribunal for determination. The fee for applying to the tribunal is £100, and the hearing fee (once you receive notice of a hearing date) is £200.

The tribunal’s decision becomes final after 28 days. If you do not agree with the tribunal’s decision, you can appeal to the Upper Tribunal (Lands Chamber) before the decision becomes final, but only if you have the tribunal’s permission. After the tribunal’s decision becomes final, you and the landlord have two months to enter into the new lease and if you do not enter into the new lease within two months of the tribunal’s decision becoming final, you have a further two months to apply to the court to order the landlord to meet their obligations.

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