EXTENDING A LEASE: HOW DO I DO IT?
If you are a leaseholder of a property, you may be thinking about extending your lease, particularly if your current lease is near expiry. If your circumstances satisfy certain conditions, it will be possible for you to extend. The advantages of extending your leasehold include increasing the value of your property, and making it easier for your property to sell on the market.
Do I Qualify for a Lease Extension?
In order to qualify you need to have been the owner of the lease for the last 2 years. Additionally, if you own a ‘long lease’, this means that it was originally granted to last more than 21 years. If you purchased your property using a shared ownership scheme, in order to qualify for a lease extension you must purchase the remainder of the property, before you can purchase the freehold.
There are some exceptions to being able to qualify for lease extension. If your landlord is a charitable housing trust, or is the National Trust, it is not possible to extend your lease. Another exception is where your landlord is planning a redevelopment of the building you live in, and you have 5 years or less left on your lease. Additionally, you do not qualify for the right if the lease involved is a business lease.
The Advantages of Extending your Lease
If you choose lease extension, subject to possible negotiation with the freeholder, this will generally be for an extra 90 year period. Additionally, you won’t need to pay any more ground rent. Another advantage is that you will be able to renegotiate the terms of your lease, or even negotiate how much you are willing to pay for this extension.
If you and your landlord cannot agree on the conditions of a lease agreement then it may be advisable to settle your leasehold disputes at the Leasehold Valuation Tribunal. This is an independent legal body which will settle your dispute without you having to attend court.
How Much Does it Cost to Extend my Lease?
If you and your landlord have agreed on a price for the extension of your lease, you will need to pay a deposit in order to secure the extension. This is either 10% of the extension price, or £250 (whichever is higher). It is often the case that you will also have to pay the legal fees of the landlord too, irrespective of whether the extension falls through or not.
If you have not yet agreed a price with your landlord, you will have to negotiate. It is worth consulting an independent professional such as solicitor and probably a surveyor who will be able to help you work out what a fair valuation of the lease extension you are looking for is, without having a biased motive for one of the parties involved.
What are the Steps to Extend my Lease?
If you believe you qualify for this right, the first step is to ask the landlord to extend your lease. This should be in the form of a written document, which is known as a ‘Section 42 Notice’. You must allow the landlord at least 2 months to respond.
The next step is for the landlord to respond to your notice. This is known as the ‘Counter Notice’. The landlord may either agree to extend your lease, ask for more information, or refuse to extend (challenging your right to do so). They may decide to accept your request to extend the lease, but want to renegotiate certain terms you have stated in your notice. If the landlord has requested they require more information, they must do this within 21 days of receiving the notice. You then also have 21 days to respond with the information. If the landlord does not respond to your notice, you are entitled to apply to the court in order for them to extend the lease for you. This should be done within 6 months of the date you stated in your original Section 42 Notice.
The final step is to negotiate the terms of extended lease. Upon agreement of these terms, you should enter into a new lease within 2 months of this date.