Statutory lease extension: an overview of the process for leaseholders

As a leaseholder, you have the statutory right to acquire a new, extended lease of your flat in substitution for your existing lease. If it’s a long lease (ie if the original term was more than 21 years) and you’ve owned the lease for at least two years, then you’re a qualifying tenant.

So, how do you get this new extended lease?

 

A word of caution……

Before embarking on this process, it’s important to understand that strict timescales apply during the various procedural stages of any claim. It’s important to ensure those timescales are adhered to, because the consequences of failing to do so can be fatal to the claim.

 

Beginning the claim

Although the first stage in the formal process is the service of the tenant’s notice of claim, there are some initial steps that a leaseholder will need to take before being in a position to serve their notice of claim.

First and foremost, a valuer will start the ball rolling and they will be instructed to advise a leaseholder on the premium to be paid to the landlord. This premium will be set out in the notice of claim that ultimately will be served on the landlord.

As well as a valuer, leaseholders are advised to instruct a solicitor. It’s all too easy to get the notices wrong or miss the time limits and this will ultimately impact on the ability to obtain a lease extension. A solicitor will draft and serve the notice of claim. This notice sets out the leaseholder’s claim to extend their lease.

The notice is served on the “competent” landlord. A competent landlord is the individual or company that has the right to grant the lease extension. Typically the competent landlord will be the freeholder but it is not uncommon for there to be intermediate landlords who will also have this right. In any event all relevant landlords as well as any management companies and any other parties written into existing leases will be served with the notice.

The notice is the first step in the process for acquiring a new extended lease. The leaseholder must bear in mind that they will be responsible not only for their own costs i.e. those of the solicitor and the valuer but also the landlord’s costs from the date that the notice of claim is served.

The date on which the notice is served fixes the valuation date. This simply means that negotiations can start from a point of certainty and that no outside variables will impact on the negotiations.

More often than not it is the valuation of the premium that has been the most controversial in a matter and requires the most work.

 

Landlord’s response

Once served with the notice, it’s likely that the landlord will require access to the leaseholder’s flat so that the landlord’s valuer can carry out their own valuation.

The landlord is also likely to ask for the payment of a deposit (equal to 10% of the premium being offered).

The landlord will have to serve the leaseholder with a counter notice within the specified time in the notice of claim and this will confirm whether or not the claim for the lease extension is accepted or rejected by the landlord. The landlord can also set out any other terms for the lease extension which they may want to include should the extension be accepted.

 

What if there’s a dispute?

It’s not uncommon for there to be some disagreement between landlord and leaseholder about the terms of the new extended lease and/ or the premium to be paid by the leaseholder. These disputes are often resolved by negotiation between the parties, maybe with the assistance of valuers.

If those negotiations are not fruitful, either party may apply to the First Tier Tribunal (Property Chamber) (FTT) no less than two months and no more than six months from the date of the counter notice. The FTT will hear any cases and will determine the premium and the terms of the new lease if these cannot be agreed ahead of the hearing. In the vast majority of cases terms are agreed and there is no need for a final hearing.

 

Completing the process

Once the terms and premium have been agreed (either as a result of negotiation between the parties or because of an FTT determination), the parties will complete the new lease.

 

How can PM Legal Services help?

If you are unsure about the process of extending your lease and need some advice, please contact Liz Rowen at PM Legal Services.