If you have owned your property for at least two years, you have rights to extend your lease.
- You can extend your lease for an additional term of 90 years, and the rent is reduced to a peppercorn (aka a very small amount) – this means you no longer pay any ground rent.
- You do need to pay a premium, which is calculated by a surveyor taking into account the value of the property, the length of the current lease and the current ground rent.
- You don’t need to live in the property to be able to extend the lease.
In order to save you costs, we advise that before initiating the legal procedure to force your landlord to grant a lease extension, you contact your landlord on an informal basis to see whether they are prepared to extend the lease, and if so whether you can agree to the terms.
We can then help you with the conveyancing process – dealing with the paperwork including reviewing the new lease, obtaining the permission of your lender, dealing with completion formalities and registration of the new lease. If you are looking at extending your freehold lease, read on to find out more about the Formal Lease Extension Process, or get in touch for more information.
We are able to calculate your lease extension by taking into account the unexpired term, existing lease value, and ground rent per year. To find out how much you will have to pay, get in touch with our expert Darren Coleran.
Once you have decided to initiate proceedings to extend your lease, the formal process under the Leasehold Reform, Housing and Urban Development Act 1993, is outlined below:
- We can recommend qualified valuers/surveyors to you who will give you a ‘best and worst case’ valuation.
- Once you have obtained a valuation and are happy to proceed, we can prepare a “Notice of Claim” which is served on your landlord.
- Once your landlord has received your Notice of Claim, they can request the following from you:
- Proof of your right to a lease extension – normally this is evidence showing that you have owned the property for at least two years.
- A deposit of 10% of the amount offered in your Notice of Claim.
- Access to your property so that an inspection can be carried out for your landlord’s own valuation purposes.
- Your landlord must serve a Counter-Notice (known as a Section 45 Notice) in response to your Notice of Claim within 2 months of receiving your original Notice. The Counter-Notice will state whether or not the landlord accepts your right to a lease extension.
- Usually, the landlord will accept your right to extend the lease – as this is a statutory right – but they may not agree to some of your terms in your Notice of Claim (the most common term in dispute is the purchase price). If this is the case, the Counter-Notice must contain counter proposals.
- If your landlord fails to respond to the Notice of Claim, you are entitled to make an application to the Leasehold Valuation Tribunal for a determination that the lease extension is granted on the terms set out in your Notice of Claim.
- Once we have received the landlord’s Counter-Notice, if there are any terms that are disputed, negotiations then take place to try and agree to the terms. If this is to do with the price, the negotiations may be done by the surveyors. If the terms are agreed through negotiation, we will deal a new extended lease.
- If a price cannot be agreed either party can apply to the Leasehold Valuation Tribunal to determine the matters in
If you want to take control of your property and make decisions around the management and maintenance of the block, you may be able to force your landlord to sell the freehold title to you. Whether you own a flat or a house, we can help you extend your lease -without the payment of a premium.
You can purchase the freehold title if:
- There are at least two flats in the building, and
- At least two of the flats are let to ‘qualifying leaseholders’(usually leaseholders with long leases, which were originally 99 or 125 years long)
- Not more than 25% of the building is non-residential
In order to purchase the freehold title, you will need at least 50% of the leaseholders in the building to join you on the purchase – if you can’t get 50% to join, the freeholder does not have to agree to the sale. You can still ask whether you can agree the purchase of the freehold on an informal basis, however, the freeholder will be required to serve a formal Offer Notice on all leaseholders (including you) providing them with a Right of First Refusal.
Once 50% are on board, we advise that you set up a Freehold Management Company to manage ownership. When all leaseholders are ready to proceed, you will be able to start the Collective Enfranchisement process. This involves serving Notice on your freeholder which requires the involvement of a valuer/surveyor and a solicitor. Before deciding to go ahead with the purchase, be aware that leaseholders are required to pay the freeholder’s costs in investigating their title, valuation, and conveyancing.
Service charges cover services, repairs, maintenance, improvements, or insurance to a property. They’re payable by the leaseholder as part of their rent, and they are basically how the landlord recovers the costs of maintaining the property.
Leaseholders do have a right to question these charges, and we can help you if you’re not happy with them. If they are not laid out in the lease, they’re not legally valid, or if the amount is unreasonable, you can dispute the charges.
If there is a dispute, a Tribunal can determine:
- Whether a Service Charge is payable
- Who it is payable by and to
- How much is payable
- When it is payable
- How it is payable.
If you decide to challenge service charges, we can help. We provide a fixed-fee to handle any aspect of a dispute – from an initial review of the lease to advise on the service charge provisions, right through to preparing for a Tribunal hearing. Successful service charge challenges can result in heavy discounts to the Service Charge.
It’s hard to keep everyone happy, especially when it comes to managing a block of flats. If you want to gain control over the management of your property when it’s in a block of flats, you can set up a Right to Manage (RTM) Company. You don’t need to prove the building has been mismanaged – this is a right under the Commonhold and Leasehold Reform Act 2002.
To qualify for a RTM, the building must:
- Be a self-contained whole or part of a building (a part must be structurally detached).
- Contain at least two flats.
- At least two thirds of the flats must be held by what are called qualifying leaseholders – someone whose lease was originally granted for longer than 21 years. They do not need to be resident so the flat can be rented out.
If the building includes some commercial use, this part of the building cannot exceed 25% of the total floor area of the building. The leaseholders will first need to set up a special RTM Company. Once the company has been incorporated the establishing leaseholders will need to formally invite all the other leaseholders to join it – there can be no exclusions. They then need to ensure that at least half of the number of flats join the RTM company.
Once a majority is achieved, a Notice of Claim for the RTM can be served on the landlord and if the right is accepted the management functions will pass to the RTM Company. We can help serve the required Notices at each stage of the process and assist with the handover process. The RTM takes away a lot of the Landlord’s rights, so if leaseholders get it wrong, landlords unsurprisingly tend to challenge the claim. That’s why it’s important to have good legal advice to advise you on the process, ensuring that you’re not open to challenges to the RTM.
If your block of flats is poorly managed and you can’t convince a majority of leaseholders to participate or afford to set up a collective enfranchisement or manage the building yourself, or perhaps the building doesn’t fulfil the requirements to set up a Right to Manage, you might be able to appoint an independent manager.
- An application to a specialist Tribunal needs to be made by at least two leaseholders (unless one leaseholder owns multiple flats).
- This procedure is fault-based, so leaseholders need to be able to show that the landlord has failed in his obligations.
- The aim of the proceedings is to ensure that the future maintenance and management of the building is safeguarded through the appointment of an independent manager (the manager would also take responsibility for any commercial property) for a specified term of years (usually five).
- The management is then governed by a formal document called a Management Order, rather than the leases.
In order to appoint a manager, the Tribunal must be satisfied that:
- The existing manager (this could be the landlord or management company) is in breach of any obligation owed under the lease to the leaseholders, and that it is “just and convenient” to appoint another manager, or
- The existing manager is in breach of the RICS Code, or
- Unreasonable service charges have been levied, or are proposed or likely to be levied
- Other circumstances exist
Before making any application, the leaseholders must give the landlord an opportunity to redress any existing defects and a preliminary application notice must be served on the landlord, and any other person who has management obligations in respect of the premises. If the Landlord does not take any remedial action and the time frame expires, then it is open to the leaseholders to make a formal application for the appointment of a manager.
Are you subletting your leasehold property? Are you aware that the terms of your lease might prevent you from doing so? You might even need the consent of your landlord before subletting. Some leases may not only require the landlord’s consent to sublet, but they may also require the subtenant to enter into a document called a Deed of Covenant with the landlord directly.
If a leaseholder is subletting their property without consent when consent should have been sought, then their landlord may be able to take action against them and, if the lease allows for it, even forfeit their lease.
If you are looking to rent your leasehold property out, or you already have subtenants living in the property, please contact us and we will be happy to discuss your options.
If you want to undertake alterations to your leasehold property, be it painting or decorating to an entire structural conversion, you might actually require your landlord’s consent. It will depend on the terms of your lease, which is why it’s vital to check and ensure before undertaking any works.
If you fail to obtain the landlord’s consent when it is required, you could be in beach of the terms of your lease and face the landlord bringing action against you. This action might require you to put the property back into its original state at your own expense, or even cause you to forfeit the lease, meaning the property is given back to your landlord.
Alternatively, if the works have already been undertaken and consent was required, your landlord might be agreeable to those works and be willing to grant retrospective consent. There’s no guarantee on this however, and the landlord is not compelled to grant it.
This is why it is so important to check whether or not you will need the landlord’s consent before you start any work. If you are planning to carry out work to your property and are unsure if your landlord’s consent will be required, please get in touch with our expert Darren Coleran.