Extending your lease

If you have recently checked the number of years remaining on your lease and decided you would like to extend the term, you now need to get in touch with your landlord.

But what if you have a dysfunctional relationship with your landlord or, worse, they are totally absent? This does present a problem but rest assured there is a way with the assistance of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act“).

In brief, in order to qualify for a lease extension under the Act, the leaseholder must:

1) have owned the property for at least 2 years; and

2) hold the property on a “long lease” (a lease originally granted for a term of at least 21 years), which almost all residential leases are.

Exceptions do apply, meaning some leases cannot be extended. These are fairly rare and are beyond the scope of this article. Nevertheless, your solicitor will consider this when establishing your entitlement.

What exactly are we talking about when we say “lease extension”?

The Act entitles a qualifying leaseholder to a new lease of 90 years plus the unexpired years remaining on the existing lease. The ground rent is also reduced to a “peppercorn”, which is effectively zero.

Other than the above, the Act states that the new lease “shall be on the same terms as the existing lease”.

Opportunities to make other changes to the lease are very limited and tend to be permitted only where there is a serious defect or omission in the existing lease. The landlord is of course entitled to monetary compensation for granting a new lease and this is referred to as the “premium” payable for the new lease.

The process

Assuming you know the whereabouts of your landlord, you will want to serve a written notice expressing your right to claim a new lease. In that notice, you should state a genuine opening offer for the premium payable to the landlord for the new lease. You should insert a date (at least two months ahead) by which the landlord must respond with a counter-notice. Failure to respond with a counter-notice means the landlord is effectively deemed to have accepted all proposals put forward by the leaseholder. This is potentially catastrophic for a landlord but a financial benefit for a leaseholder, as the premium payable for the new lease becomes fixed as proposed in the notice.

Under these circumstances, the leaseholder can apply to the County Court for a Vesting Order requiring the landlord to grant a new lease on the exact terms which were set out in the notice.

The application must be made within six months of the final date on which the counter-notice should have been given. Assuming the application is in order, the court takes the matter out of the landlord’s control.

The premium will be paid to the court and the court will execute the lease on behalf of the landlord, thus completing your lease extension.

A further example of a problem landlord might be one who is a bankrupt individual or a company in administration. Where this is the case, the notice must be served upon the landlord’s trustee in bankruptcy or administrators. If the leaseholder’s notice is served in this way, then the landlord’s trustees or administrators will be bound by the Act and are required to act as the landlord in dealing with your claim.

There is still the issue of where the leaseholder cannot find the landlord at all. If, after all reasonable efforts, the landlord cannot be found, then the leaseholder can still proceed even though they will not be serving the notice mentioned above. Once again, the Act sets out the procedure:

1) The leaseholder must apply to the County Court for a Vesting Order.

2) Provided the Court is satisfied that the leaseholder is eligible for a new lease, it will grant the lease to the leaseholder in place of the landlord.

3) As part of the process, as distinct to the first scenario discussed, the Court will seek a determination on the premium payable from the Leasehold Valuation Tribunal. It is for this reason that it is always best to locate the landlord and serve a notice where possible.

If you would like discuss any aspects of extending your lease, please contact Matthew Hawkins or one of the other experts in our Enfranchisement Team.

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