Anyone who owns a leasehold flat with approaching 80 years left to run on the lease should act quickly to extend if they want to avoid unnecessary additional costs, according to Helen Murphy, Head of Residential Conveyancing.
“The law states that a qualifying leaseholder can be granted a new lease for an additional 90 years from the expiry of their current lease,” explains Helen. “Additionally they are entitled to have their ground rent reduced to zero. But what a lot of leaseholders don’t realise is that if they leave the unexpired term to fall below 80 years the cost can jump significantly because the freeholder is then entitled to a share of the increase in the value of the flat should the lease be extended.”
Who can extend a lease?
Owners have a right to extend their lease if their property is a leasehold flat which they have owned for at least 2 years (although there is no need to have lived in the flat for two years). It must be a long leasehold i.e. greater than 21 years.
How do you go about it?
Once your lawyer has established that you qualify, a formal notice is served on the landlord. “Once the notice has been served, the landlord has to respond within a given time frame,” explains Helen. “Usually the landlord services a counter-notice accepting the right to a lease extension but disputing some of the terms.” The landlord can also dispute the right to the lease extension itself but this tends to be unusual.
Where the landlord disputes the terms, this is most frequently focused on the price to be paid by the flat owner for the lease extension. A period of negotiation is set aside until the terms are agreed between the parties, failing which either party can apply to the Leasehold Valuation Tribunal (LVT) to make a ruling. “There are fixed time scales for each stage of the process from serving the notice to the right to the new lease being granted, so it’s vital that flat owners are well prepared from the start of the process,” adds Helen. “They should also be aware that as well as the cost of the lease, they will have to pay the valuation and legal fees of the freeholder as well as their own.” A rough idea of how much a lease extension premium will cost can be found by using the calculator on the Leasehold Advisory Service website www.lease-advice.org.uk.
A longer lease enhances a property’s value
Helen adds “This might seem like a large expense but a longer lease will enhance a property’s value and make things easier if the flat owner wants to sell or re-mortgage. So even if you’ve got more than 80 years left on the flat lease, it’s worth looking at this issue now to allow time to deal with the extension claim, should it prove advisable.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.