Lease extensions

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Lease extensions

The benefits of extending the lease

By extending the lease, the flat owner can help protect the value of the property.  Having an extended lease makes the property easier to sell.  A flat with a short lease can be more difficult to re-mortgage, so a lease extension would resolve this as well. 

A premium (price) is normally has to be paid to the landlord for a lease extension.  When the unexpired term of a lease is 80 years or less the premium will include “marriage value”, which can increase the premium significantly.  So it is worthwhile to extend the lease before there are 80 years or less to left to run. 

If the lease has less than 80 years to run it is still usually better to extend the lease sooner rather than later, to reduce the impact on the premium to be paid.

Entitlement to lease extension

A lessee who has owned the flat for at least 2 years is normally entitled to demand from the landlord a 90 year extension of the term of the existing lease, using the statutory lease extension process under the Leasehold Reform, Housing and Urban Development Act 1993.  This would be a new lease for an extended term but is referred to as a lease extension.  A lessee who does not live at the flat, but who has owned the flat for at least 2 years, is still entitled to a statutory lease extension.  The yearly ground rent which is payable under an extended lease is a peppercorn, so that in practice no ground rent is payable.  Lessees who start the statutory procedure for a lease extension can apply to the First-tier Tribunal to determine the premium if this is not agreed with the landlord.

If a lessee does not qualify for a statutory lease extension it might still be possible to agree a lease extension on a voluntary basis, although there is no obligation for a landlord to agree to a voluntary lease extension.  The term of the lease, the ground rent and any other provisions would be have to be negotiated.  There is no entitlement to have the premium or other terms determined by the First-tier Tribunal.  A voluntary lease extension depends on the landlord and the lessee being willing to proceed and depends on them acting reasonably.

 Share of freehold

If the flat owner also owns a share of the freehold or is a member of the company which owns the freehold, the flat still has a lease and how long that lease has left to run still matters.  For an explanation of the advantages of extending the lease see “The benefits of extending the lease” above.

When the owners of the flats in a building own the freehold (or own the company which owns the freehold) they usually agree to extend the leases without having to pay a premium (price) for the lease extension.  Often, the lease is extended to 999 years with no ground rent to pay.

How much will have to be paid to the landlord for the lease extension?

The lessee will have to pay a premium (price) for the lease extension.  The premium payable is based on a number of factors, including the value of the flat, how many years are left to run on the existing lease and the ground rent. 

If the existing lease has 80 years or less to run then marriage value has to be included in the valuation of the premium.  Marriage value is the increase in the value of the flat as a result of the lease extension. 

The lessee and the landlord will each need a professional valuation from a specialist surveyor for guidance on the premium to pay for the lease extension.  We can recommend surveyors who specialise in lease extension valuations.

For share of freehold lease extensions a premium does not usually have to be paid.

The lessee will normally also have to pay the landlord’s costs.  With statutory lease extensions, the landlord is legally entitled to have certain reasonable costs paid by the lessee, being the landlord’s surveyor’s valuation fee and the landlord’s solicitors’ costs for ascertaining the lessee’s right to make a claim for a lease extension, for giving a counter notice and for drawing up the new extended lease.

How does the process work/what are the steps?

For a statutory lease extension, the process is formally started by the lessee serving a notice of claim (often called a section 42 notice) on the landlord. In the notice of claim the lessee sets out the premium which is offered for the lease extension and other relevant proposals.  The landlord is given approximately two months to give its counter-notice.  The landlord’s proposals are made in the counter-notice.

If the premium and other terms are not agreed after the counter-notice is given, the lessee or the landlord can apply to have these decided by the First-tier Tribunal.  The Tribunal would determine the reasonable premium to be paid and the other outstanding terms.   

Once the premium and the other terms are agreed between the lessee and the landlord, or decided by the First-tier Tribunal, the extended lease is to be completed.  After completion, the extended lease is to be registered at the Land Registry.

Our costs

Statutory lease extension

Our charges for a statutory lease extension will depend on the how much work must be carried out before terms are agreed with the freeholder or determined by the First-tier Tribunal.

Typically, our costs for acting for the lessee would be between £2,200.00 to £3,995.00 plus VAT and disbursements.  This assumes a hearing at the Tribunal does not take place and that rather than a lengthy document being used for the lease extension, a shorter version is used (which is usual).

The disbursements would be approximately £100.00 in total for Land Registry fees and a lawyer checker fee.  The amount of the Land Registry fees will depend on the premium to be paid for the lease extension.  Also, there may be tribunal fees of £100.00 to £300.00.

Voluntary lease extension

For a voluntary lease extension, our costs for acting for the lessee are estimated at £1,000.00 plus VAT and disbursements.  This assumes that rather than a lengthy document being used for the lease extension, a shorter version is used (which is usual).

If there is a mortgage on the flat, an additional charge of £250.00 plus VAT is made for the dealing with the deed of substituted security which is required to transfer the mortgage on the title for the existing lease to the title for the new extended lease.

The disbursements would normally be, approximately, £65 for Land Registry fees and a lawyer checker fee.  The amount of the Land Registry fees will depend on the premium to be paid for the lease extension.  If the lender charges an administration fee for dealing with the above-mentioned deed of substituted security, this would be an additional disbursement, perhaps £50.00 to £100.00 or so.

Share of freehold

If you own a share of the freehold (or are a member of the company which owns the freehold) it is a good idea for all of the leases of the freehold owners to be extended.  If we are dealing with lease extensions for more than one flat then we can offer a reduced rate for our costs.  The amount would depend on the number of flats involved.

Why are Grant Saw the best people for the job?

Grant Saw have a dedicated leasehold enfranchisement team to deal with lease extensions, as well as with purchase/sales of freeholds and right to manage claims.  We are experts in this field, with many years of experience in successfully acting for numerous flat owners and landlords in relation to statutory lease extensions (including dealing with cases which are taken to the First-tier Tribunal and to court) and in relation to voluntary lease extensions, including share of freehold lease extensions.

Please contact us if you have any queries and we would be happy to discuss these.

Meet the Lease extensions team
Ray Crudgington
Managing Partner
greenwich
02083054224
ray.crudgington@grantsaw.co.uk
Maria Lati
Partner
Head of Residential Property
blackheath
02083054229
maria.lati@grantsaw.co.uk
Mike Clary
Partner
Head of Family
greenwich
02083054237
mike.clary@grantsaw.co.uk
Kalpa Prajapati
Partner
Head of Private Client
blackheath
02083053536
kalpa.prajapati@grantsaw.co.uk
Mario Savvides
Partner
Head of Commercial Property
greenwich
02083053531
mario.savvides@grantsaw.co.uk
Sarah-Kate Jackson
Partner
Head of Litigation
greenwich
02083054236
sarah-kate.jackson@grantsaw.co.uk
Adina-Leigh Collins
Litigation
Solicitor
greenwich
02083053556
adina-leigh.collins@grantsaw.co.uk
Aimal Gram
Commercial Property
Solicitor
greenwich
02083053524
aimal.gram@grantsaw.co.uk
Aisha Mohammed
Residential Property
Solicitor
greenwich
02083054228
aisha.mohammed@grantsaw.co.uk
An Le Tran
Commercial Property
Professional Support Solicitor
greenwich
02083054226
anle.tran@grantsaw.co.uk
Angus Young
Litigation
Solicitor
greenwich
02083054225
angus.young@grantsaw.co.uk
Atifha Aftab
Family
Solicitor
greenwich
02083054238
atifha.aftab@grantsaw.co.uk
Bimal Kotecha
Litigation
Solicitor
greenwich
02083053523
bimal.kotecha@grantsaw.co.uk
Charlotte Warren
Charlotte Warren
Private Client
Solicitor
blackheath
02083054231
charlotte.warren@grantsaw.co.uk
Claire Mac Mahon
Litigation
Solicitor
greenwich
02083053537
claire.macmahon@grantsaw.co.uk
Deborah Taite
Residential Property
Solicitor
blackheath
02083053542
deborah.taite@grantsaw.co.uk
Emily Pearce
Residential Property
Solicitor
greenwich
02083053526
emily.pearce@grantsaw.co.uk
Georgia Beales
Litigation
Paralegal
greenwich
02083054206
georgia.beales@grantsaw.co.uk
James McKimm
James McKimm
Corporate and Commercial
Solicitor
greenwich
02083054217
james.mckimm@grantsaw.co.uk
Jeremy Brooks
Jeremy Brooks
Private Client
Solicitor
blackheath
02083053534
jeremy.brooks@grantsaw.co.uk
Joanna Godden
Notary Public
Notary
greenwich
02083083535
joanna.godden@grantsaw.co.uk
Kim Whitaker
Kim Whitaker
Corporate and Commercial
Head of Corporate and Commercial
greenwich
02083053539
kim.whitaker@grantsaw.co.uk
Lauren Smith
Employment and Family
Paralegal
greenwich
02083053543
lauren.smith@grantsaw.co.uk
Maleeha Iqbal
Residential Property
Licensed Conveyancer
greenwich
02083054232
maleeha.iqbal@grantsaw.co.uk
Mandeep Clair
Family
Solicitor
greenwich
02083054235
mandeep.clair@grantsaw.co.uk
Michael Pope
Employment
Consultant Solicitor
greenwich
02083053540
michael.pope@grantsaw.co.uk
Michelle Pinnington
Michelle Pinnington
Residential Property
Solicitor
greenwich
02083054216
michelle.pinnington@grantsaw.co.uk
Noella Gooden
Employment
Solicitor (Australian qualified)
greenwich
02083053543
noella.gooden@grantsaw.co.uk
Raj Waghela
Raj Waghela
Residential Property
Solicitor
greenwich
02083053529
raj.waghela@grantsaw.co.uk
Randeep Thethy
Randeep Thethy
Residential Property
Solicitor
greenwich
02083054209
randeep.thethy@grantsaw.co.uk
Sarah Conner
Sarah Conner
Private Client
Solicitor
blackheath
02083054234
sarah.conner@grantsaw.co.uk
Simona Morina
Litigation
Solicitor
greenwich
02083053521
simona.morina@grantsaw.co.uk
Simran Lalli
Simran Lalli
Employment
Solicitor
greenwich
02083054208
simran.lalli@grantsaw.co.uk
Susan Collins
Commercial Property
Solicitor
greenwich
02083054200
susan.collins@grantsaw.co.uk
Tatiana Zenina
Tatiana Zenina
Private Client
Solicitor
blackheath
02083054239
tatiana.zenina@grantsaw.co.uk
Trisha Djemal
Trisha Djemal
Residential Property
Consultant Solicitor
blackheath
02083053546
trisha.djemal@grantsaw.co.uk
Tyrone Grant
Residential Property
Head of Leasehold Enfranchisement
blackheath
02083053522
tyrone.grant@grantsaw.co.uk
Denise
Accounts Staff
greenwich
02088586971
enquiries@grantsaw.co.uk
Jamie
Support Staff
Head of IT
greenwich
02088586971
enquiries@grantsaw.co.uk
Jayne Lye
Support Staff
Office Manager
greenwich
02083054204
jayne.lye@grantsaw.co.uk
Kasia
Accounts Staff
greenwich
02088586971
enquiries@grantsaw.co.uk
Michael Tobin
Michael Tobin
Support Staff
Marketing and Business Development Manager
greenwich
02083053550
michael.tobin@grantsaw.co.uk
Laura Danquah
Compliance Manager
greenwich
02083054222
laura.danquah@grantsaw.co.uk
Sue Holness
Support Staff
Customer Services
greenwich
02083054221
sue.holness@grantsaw.co.uk