Residential lease extensions

Our valuers specialise in residential lease extension  We act on behalf of landlord or tenants advising on options available to each party.

 

Experts in lease extension negotiation and valuation

What do we do?

Acting for either the leaseholder or the freeholder, we specialise in the valuation and negotiation required for residential lease extensions. We operate throughout London, Buckinghamshire, Berkshire, Surrey, Hampshire, Oxfordshire and Hertfordshire. 

We act and advise on

Residential lease extensions

The Leasehold Reform, Housing and Urban Development Act 1993 gives the leaseholder – also known as the tenant or lessee – the right to extend their lease by a further 90 years, without a ground rent. The freeholder is legally obligated to comply with this request, depending on three criteria:

  • The property must be a flat
  • The leaseholder has owned their flat for at least 2 years
  • The lease has an original term of at least 21 years

It is especially important for leaseholders to act upon extending their lease when the unexpired lease term is approaching 80 years as this is when the costs involved begin to escalate

Key things for leaseholders to consider

You can extend your lease at any time

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You have the right to extend your lease by 90 years

If you have less than 80 years on your lease, you need to act now

What is the process for extending my lease?

  1. Find a solicitor and surveyor. The Leasehold Advisory Service and the Association of Leasehold Enfranchisement Practitioners have lists of solicitors who are specialists in the field. Costs can vary, so it’s important to do your research beforehand – check whether the fee is fixed or an estimate.
  2. Obtain a valuation of the premium. You will need a surveyor to value your property and determine the likely premium. The cost of the valuation will vary depending on the value of your property. To receive a formal quote, call Kempton Carr Croft on 01628 771221.
  3. Initiate negotiations. Once you have read your surveyor’s report, you can start negotiating with your landlord. This can be started informally as it can save costs but if you do not make progress, or your lease is approaching 80 years, you should start the process formally with a Section 42 Notice. The Section 42 Notice served by your solicitor claims your right to a 90-year lease extension without a ground rent, and offers your landlord a premium.
  4. Your landlord will then serve a Counter Notice, which will include their counter premium proposal. This must be served within two months from the date your solicitor served your Section 42 Notice.
  5. Once the Counter Notice has been served, negotiations will take place between the surveyors of the two parties. If all goes well and both parties can agree on the premium, the new lease form will be agreed by the solicitors and completed.
  6. If the surveyors are unable to agree on a premium, you can apply to the First-tier Tribunal to have the matter settled. The applications must be made within six months of when the freeholder’s Counter Notice was due. Once you apply, you will be notified of the hearing date and timescales for producing reports. Your surveyor and solicitor will work together in order to submit any reports and attend the tribunal on your behalf, if necessary. The Tribunal will then consider both parties’ evidence and determine the final premium.

A guide for leaseholders

Extending your lease can be a complex process, so ensuring you have the right legal and valuation advice is imperative. To help you gain a better understanding of the process, we’ve answered some of the most common questions below.

  • What is a lease extension?

    A lease extension gives the leaseholder (also known as the ‘tenant’ or ‘lessee’) the right to extend their flat’s least by a further 90 years.

    This is enabled by the Leasehold Reform, Housing and Urban Development Act 1993, and the Commonhold and Leasehold Reform Act 2002. The freeholder (also known as the ‘landlord’) is legally obligated to comply with this request.

  • Who can apply for leasehold extension?

    The leaseholder must have owned the property for at least 2 years, and the lease must have an original term of at least 21 years. You do not need to have lived in the flat at any time.

  • Should I extend my lease?

    Yes. The fewer the number of years remaining on the flat’s lease, the less valuable it becomes. With a reduced value, it will be harder to secure a mortgage and the flat will become more difficult to sell.

  • What happens if I have less than 80 years on my lease?

    Most lenders require at least 70 years remaining on the lease, with some requiring as much as 85 years. If the lease is below this figure, you are restricting the market to cash buyers without a mortgage, and they will likely require a discount from your expectations. The longer you put off extending your lease, the flat will become less valuable, increasingly difficult to sell, and the cost of a lease extension will increase.

  • When should I consider extending my lease?

    Put simply, there is no better time than now. The process only becomes more expensive as the lease shortens. One important milestone is when the lease falls below 80 years. Once this occurs, the cost to extend your lease now includes the addition of a ‘Marriage Value’, which increases the premium substantially. Marriage value is the amount of extra value a lease extension would add to your property. Therefore, all leaseholders should be wary of this event and ensure action is taken well in advance.

  • How long will I be able to extend my lease for?

    Your lease will be extended by 90 years, in addition to the remaining term. For example, if you have 70 years left on your lease, you will be given a new lease of 160 years.

  • How much will it cost?

    The price depends on several variables, such as the value of the flat, the ground rent payments, and the length of the current lease. You will need a Chartered Surveyor to carry out a valuation of your property and determine the likely extension premium. The final sum is then negotiated between the leaseholder and the freeholder. Other costs to consider include legal fees, valuation fees, stamp duty, and the freeholder’s fees.

  • How should I pay for it?

    The most common way of covering the costs is to extend your mortgage. Most lenders will be happy to do this if you have sufficient equity, as it increases the value of their security.

  • What is a Section 42 Notice?

    A Section 42 Notice is the formal notice which triggers the statutory lease extension process. This is sent by your solicitor to your freeholder. This Notice should be served with proof of delivery, so the serving of the Notice cannot be disputed.

  • How long will it take to apply for a lease extension?

    On average, the process could take between six to twelve months. If an informal agreement can be made with cooperation from the freeholder, this time can be reduced.

A guide for freeholders

Extending your lease can be a complex process, so ensuring you have the right legal and valuation advice is imperative.Below we’ve included answers to some of the most common questions, to help give you a better understanding.

  • What are my responsibilities as a landlord?

    The leaseholder should initiate negotiations with the freeholder once their surveyor has valued the property and calculated the likely premium. This can be done informally to start – however if no progress is made, then the leaseholder can issue a Section 42 Notice. The freeholder then responds with a Counter Notice which will include their counter premium proposal. This must be served within 2 months of the date of the Section 42 Notice. Negotiations will then begin between the surveyors of the two parties. If the surveyors of the two parties are unable to agree on a premium, then either party can apply to the First-tier Tribunal to have the matter settled by an independent body. This can be done within 6 months from when the freeholder’s Counter Notice was due.

  • Can I challenge a leasehold extension?

    A lease extension can be challenged. However, if an agreement of terms is not finalised by the surveyors of both parties, the issue can be taken to a First-tier Tribunal to have the matter settled by an independent body.

  • Who is liable for the fees involved?

    If the leaseholder begins the formal statutory lease extension process by issuing a Section 42 Notice, then they are responsible for costs incurred by the freeholder during the claims process. This will include: • The freeholder’s valuation of the property • The legal costs of drawing up a new lease • Any costs from the original claim of the lease extension. • The premium payable to extend a leasehold The leaseholder will not pay for any legal costs for negotiating the price. If the leaseholder and the freeholder enter informal negotiations regarding a leasehold extension, each party is liable for their own individual costs incurred, but the payment of the freeholder’s costs may form part of these negotiations. If the surveyors of the two parties cannot agree on a premium and the claim is taken to a First-tier Tribunal, each party will be liable for their own costs.

  • Am I entitled to charge a free for varying the lease?

    If a leaseholder enters statutory proceedings the freeholder does not have the right to charge a fee, as the leaseholder has a legal right to extend their leasehold. However, leaseholders are obliged to pay the landlord a premium for the lease extension – which will be determined by specialist surveyors of both parties – as well as paying any reasonable costs incurred by the freeholder.

  • Do I have to negotiate using formal Notices?

    If the leaseholder and freeholder initiate negotiations, the freeholder can put forward their own lease terms before the Section 42 Notice has been issued. This may include charging the leaseholder fees for requesting a lease extension. However, the freeholder is under no obligation to enter informal negotiations and may offer a new lease on different terms – for example, a lease term of less than the 90-year extension provided by statute or at an increased ground rent. If terms cannot be agreed on through informal negotiations, the leaseholder does not have recourse to the First-tier Tribunal and must therefore commence the formal statutory process.

  • What are my rights as a landlord?

    Once the Section 42 Notice has been served, the freeholder has the right to request evidence of the leaseholder’s title to the flat and their period of ownership. If this is not supplied by the leaseholder within 21 days then the Notice of Claim can be withdrawn, and the leaseholder must pay any “reasonable” costs and valuation fees incurred by the freeholder. Freeholders can appoint their own specialist chartered surveyor to inspect the leaseholder’s flat for valuation and calculate the likely premium. At this stage, the freeholder requests a 10% deposit of the initial offer price set out in the Notice of Claim from the leaseholder, payable to the freeholder within 14 days of the request being made. Even after an application for a lease extension has been submitted, the freeholder still maintains the right to sell their freehold. This will subject the new purchaser to any existing applications for a lease extension, if they have registered their Notice of Claim with the Land Registry. This means any application for a lease extension will continue as though the new owner had originally received the Section 42 Notice. If a freeholder owns a property with a lease of less than 5 years from the service date of the notice, then they can claim the right of redevelopment against the leaseholder’s request for an extension. In this circumstance, the landlord has to prove indefinitely that he intends to demolish and redevelop the building, therefore voiding the leaseholder’s extension claim. In addition to this, the landlord has the right to repossess the flat for purposes of redevelopment, once the existing lease has reached the end of its term. This right is subject to an application to the courts as well as compensating the existing leaseholder for the full value of the 90 years that remains on the lease.

  • Does the leaseholder have the right to extend the lease?

    Under the Leasehold Reform Housing & Urban Development Act 1993 and the Commonhold & Leasehold Reform Act, a leaseholder legally qualifies to extend their lease, provided the below qualifications are met: The property is a flat The leaseholder has owned the property for at least 2 years The lease has an original term of at least 21 years As long as the leaseholder requesting a leasehold extension meets the above criteria, they have the legal right to proceed with initiating negotiations.

  • Informal negotiations

    If the leaseholder and freeholder initiate negotiations, before issuing the Section 42 Notice, the freeholder can put forward their own lease terms, which may include charging the leaseholder fees for requesting a lease extension. The landlord is however under no obligation to enter into informal negotiations and may offer a new lease on different terms; such as a lease term of less than the 90 year extension provided by statute or at an increased ground rent. The landlord is under no obligation to enter into informal negotiations and if terms cannot be agreed on this basis the leaseholder does not have recourse to the Tribunal and must therefore commence the formal statutory process.

Specialists in valuation for lease extension

We have experienced RICS registered valuers specialising in valuation for lease extensions who operate throughout London, Buckinghamshire, Berkshire, Surrey, Hampshire, Oxfordshire and Hertfordshire. We can also act nationwide as required. Our recognised and recommended regional firm has a multi-disciplined team that takes pride in its work and in delivering the highest standard of service by building strong working partnerships based on trust, efficiency and excellent communication.

For guidance on your individual options, please get in touch

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Our Team

Nathan Hall

BSc (Hons) MRICS

Head of General Practice
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Paula Harrington

MRICS

Chartered Surveyor & RICS Registered Valuer
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