Leasehold Extensions

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Leasehold Extensions

What is a leasehold extension?

If you own a leasehold property then you only own the property for a fixed period of time. The lease document will set out the length of the lease and will contain any requirement to pay a ground rent.

As a lease is only for a set period of time the value of the property decreases as the length of the lease gets shorter. It then becomes necessary to extend the lease to increase the value of the property.

Subject to certain qualifying criteria, leaseholders of flats have a statutory right to extend the lease under the Leasehold Reform Housing and Urban Development Act 1993. There is also a right for leaseholders of houses to extend their lease under the Leasehold Reform Act 1967.

Types of leasehold extension

There are two ways in which you can extend the lease on your flat: Statutory Lease Extension and Voluntary Lease Extension.

However, if you wish to purchase the freehold to the building within which your flat is located please see our collective enfranchisement page.

Statutory Leasehold Extension

If you have owned your leasehold property for at least two years then you may be entitled to a statutory leasehold extension under the Leasehold Reform, Housing and Urban Development Act 1993. The legislation provides for the leaseholder to acquire an additional 90 years on top of the unexpired term and further provides for the ground rent to be reduced to a peppercorn.

The statutory process is started by the service of a notice on the competent landlord by the leaseholder. The landlord then has a period of two months to either accept the claim and proposals or put forward counter proposals. In the event that agreement on the terms of the lease extension can’t be reached then either party can make an application to the First Tier Tribunal where the issue in dispute can be settled.

Lease extensions are a complex area of law and in order to exercise the statutory right to extend the lease you must follow strict procedures and timescales. We therefore recommend that you speak to our Leasehold Enfranchisement Team who will be able to assess whether or not you qualify under the Act and who can advise you in respect of the process.

Voluntary Leasehold Extension

A voluntary lease extension can also be referred to as an informal, non-statutory, or ‘by agreement’ lease extension. It simply means that you and the landlord agree the terms of the lease extension informally without the service of statutory notices.

If a lease extension is being agreed outside of the legislation then you are open to negotiate the terms and you are not limited to an additional 90 years or a peppercorn ground rent. This can mean that shorter lease extensions can be agreed or ground rents could be provided for which may reduce the premium the landlord requires. However, voluntary lease extensions should be approached with caution and leaseholders should ensure they receive appropriate advice before proceeding with an informal lease extension. Any lease extensions agreed informally do not have the protection given by the legislation and can lead to unfavourable terms which may affect the value of the property.

We recommend that speak to our Leasehold Enfranchisement Team who can provide further assistance on voluntary lease extensions.

Why should I extend my lease?

One of the main reasons for extending a lease is that the owners want to sell up or remortgage their property in the near future. Many mortgage lenders will not lend with a short lease term which means that a lease extension could be needed before a remortgage can take place or before a buyer is able to complete their purchase of the property.

Another reason is something called marriage value. If your lease has just over 80 years left of its term, then it is essential that you consider extending it. Once the lease term reaches 80 years or less than the premium for the lease extension will include a marriage value element which will substantially increase the cost of the lease extension. Please speak to our Leasehold Enfranchisement Team for more information on marriage value and the impact on lease extensions.

Lease extensions for houses

The statutory right to acquire a lease extension on a house is different to that of flats. The Leasehold Reform Act 1967 only provides for a lease extension of 50 years. The legislation does not provide for a premium to be payable for the extended lease but the lease can contain a modern ground rent.

The Leasehold Reform Act 1967 also provides a right, subject to certain qualifying criteria, for the leaseholders of houses to acquire the freehold. Please contact our Leasehold Enfranchisement Team for further information and to discuss your requirements.

Why choose Birchall Blackburn Law?

  • We are an established firm with offices across the North West in Chester, Chorley,
    Leyland, Manchester, Morecambe, Preston and Southport
  • We offer an initial no obligation consultation with one of our experts so we can take into
    account your individual circumstances
  • We cut out the legal jargon and keep you up to date with the progression of your matter
  • We have a specialist team of experienced and knowledgeable property Solicitors
  • Our Leasehold Enfranchisement Team have experience of dealing with all kinds of
    leasehold enfranchisement matters acting for both landlords and leaseholders
  • Whether you are a landlord, leaseholder or a group of leaseholders we can advise you
    of your rights.

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