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Extending the lease on your flat - a brief guide to obtaining a lease extension

If you have owned a long lease on a flat for more than 2 years then you may be entitled to obtain a lease extension of 90 years.

This is likely to make the property more attractive to potential purchasers in the future and will increase the value you are likely to get for it. Many people looking to buy a flat will pay close attention to the lease length, and could be swayed by a much longer term.

The Leasehold Reform, Housing and Urban Development Act 1993 gives flat owners the right to obtain a lease extension of 90 years at a nominal annual rent. Criteria do apply, but the majority of flat owners will be eligible.

In some cases, freeholders will be prepared to negotiate outside the provisions but the fall back position for the flat owner is to invoke the provisions of the Act, serve notice, and allow the process to run its course.

Whilst nothing is free and a premium will be payable for the lease extension, it is probable that the premium that you have to pay may well be less than what the freeholder is asking for, and the negotiation process will follow the structure laid out by the Act.

The process

To start the process of extending the lease on your flat, a valuation of the lease extension will be needed by an experienced valuer.

The value to be paid is likely to be more if there is less than 80 years remaining on the lease but the process is still available in those cases.

Armed with a valuation, a notice can be served on the freeholder (a section 42 notice) starting the process and specifying a date, at least 2 months in the future, by which the freeholder should respond.

By serving the notice, you will become liable for the freeholder’s costs in dealing with the notice and will also need to be prepared to pay a deposit of 10% of the proposed valuation figure.

The freeholder must respond within the specified time. If they do not, then you are entitled to apply to court for an order granting the lease extension in the terms contained in the notice.

If the freeholder does respond, then they must:

  • accept the validity of the notice and claim, and set out any individual terms they object to; or
  • dispute the claim on the basis that you are not entitled to the lease extension, and issue court proceedings for a declaration supporting this within a further 2 months. If they do not apply to court within those two months, then it will be as though no counter notice was served; or
  • object to a lease extension on the basis of redevelopment to the court within 2 months to obtain an appropriate court order. Again, if no application is made, it will be as though no counter notice was served in the first place.

If the freeholder accepts the notice but objects to the terms proposed then negotiations will start, although they will be limited by the provisions of the Act and what is allowed in a lease extension.

If terms cannot be agreed, either party can apply to the court for determination of those terms. However, this needs to be done after a minimum of 2 months and a maximum of 6 months of negotiation after the counter notice.

As and when terms are agreed, the new lease documentation needs to have been signed and completed by both parties within 2 months.

All a bit complicated?

There are tight deadlines that apply in applications for lease extensions, and a failure to comply with them may be fatal to the application for both you and the freeholder. However, the benefits for applying for an extension of your leasehold greatly outweigh the complications if you have an expert on your side.

If you want to extend your lease, or you are a freeholder and want advice for a lease extension application, or you would like to discuss any issues arising from this article, please contact Richard Gore.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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