What is a Lease Extension?
A Lease Extension is a statutory right given for 100% owned properties provided you own a long lease (more than 21 years) and have owned it for more than two years.
It enables you to extend your lease by 90 years, plus the length of the term remaining on your leasehold interest.
If the council does not own the freehold and has less than 90 years remaining on its lease, then your solicitor will deal directly with the freeholder.
The new lease will be as far as possible, on the same terms as the current lease subject to minor modifications and exclusions.
Who can apply for it?
To qualify to extend your lease for a residential property you must have owned the lease of your property for more than two years.
You can extend your lease by the statutory route. For this you must serve a notice on the Council. The notice must be in the form stipulated by Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993.
You are advised to seek legal independent advice and support regarding extending your lease. You may also wish to discuss with your solicitor what costs can be charged for undertaking the process as we cannot advise you at this stage of the cost of the process.
Why might a Lease Extension be advantageous
When the number of years remaining on your lease falls below 70 years, it becomes more difficult to sell, and purchasers want to see that there is a reasonable length of time remaining on the lease when they in turn want to sell on. Lenders are also unwilling to offer mortgages on properties with insufficient years remaining. If you are selling your property, provided you have correctly served your notice, your purchaser will have the benefit of your right and will not have to qualify themselves.
How many years can I get added on to my Lease?
Your existing lease and lease term would be extended by a further 90 years.
Do I need a Valuer?
You will need a Valuer as they will help you to:
- Carry out the valuation to assess the premium
- Give you advice on the offer you make to us
- Advise you on our response to your offer
- Negotiate with the Council
- Provide expert evidence if necessary at the First Tier Tribunal (FTT)
- It is very important that you get good independent professional advice
How will the valuer work out the Valuation?
The formula that the valuer will use to arrive at the valuation is based on the following factors:
- The reduction in value of the council’s freehold interest by the lease extension, which in some cases may be loss of a ground rent.
- If your current lease has less than 80 years remaining, the valuation will take account of a marriage value. This is the difference between the value of our interest in your property under the current lease arrangements and our value in the lease with the additional 90 years and is shared equally between us.
- Compensation for loss arising from the grant of the new lease. This is compensation for our loss in respect of other leases that have not extended their interest.
- Our reasonable costs of dealing with this application (as noted below).
What is the Council’s Counter Notice?
There is a strict period of two months to respond to your notice. We will either:
- Agree your right to the new lease and either accept the terms or propose what we consider to be the valuation. There will then be a period of between two and six months to finalise the valuation and during this time either party may apply to the First Tier Tribunal if the valuations cannot be agreed.
Or
- Deny you the right to the lease if the building is planned for demolition and redevelopment. Again this would need to be confirmed in County Court and only applies to very short leases.
If we fail to respond to your Notice, you have the right to apply to the County Court and they will make a vesting order and will determine the terms of the extension on the terms first proposed in your Section 42 Notice.
Fees
We would recommend that you discuss extending your lease with a valuer before you proceed so you will have an approximate indication of how much it might cost. You can also get an indication of how much it might cost to extend your lease using the calculator.
When you are ready to proceed you should appoint a solicitor and a valuer and they will indicate the valuation for the extension in the notice (this is called a Section 42 Notice).
There is a set procedure for agreeing the price. The valuation will be fixed at the date you apply for the extension. The council will have a period of two months to respond to this request. We suggest that your valuer provides a “best” and “worse” valuation as the eventual price is likely to be agreed somewhere in between.
You will be responsible for all your costs (valuer and solicitor) and our legal and valuation costs as well.
If you qualify and are ready to proceed, your solicitor should serve a valid Section 42 Notice to us.
Further Information:
Please contact the Leasehold Services Team if you require any further information on this matter.
Address: Hounslow House, 7 Bath Road, Hounslow TW3 3EB
Contact Number: 0208 583 3787
Email.
