If you own a flat then you have the right to extend your lease by 90 years at a nil rent. This is an individual right given to all flat owners if they satisfy certain criteria.
Alternatively, you can co-operate with other flat owners in your building and buy the freehold of the building (known as the right to collective enfranchisement).
Below are questions and answers on the right to extend the lease of your residential flat.
For more information see the FAQs on buying the freehold of flats with other tenants. Once the freehold of the building has been acquired, you can then apply for an extended lease to be granted.
Leasehold Reform, Housing and Urban Development Act 1993 (the Act).
The main ones are as follows but it should be noted that there are a number of exceptions:
It is not necessary for you to have lived at the flat. There is no residency qualification. It also does not matter if the lease is held in your personal name or by a company you control.
The lease is subject to an inferior lease which itself is a qualifying lease or it is a business lease or the landlord is a charitable housing trust. Alternatively, if you have previously made a claim you cannot make a new one until at least a year has elapsed.
There are other exemptions so before proceeding you should contact us to check your own individual situation.
Your lease is a wasting asset. As the length of the lease decreases so does its value. Particular points to bear in mind are:
You can add 90 years to what is left on your existing lease. For example, if you have 80 years left on your lease you will be given a new lease of 170 years.
You will have to pay a premium to the landlord to grant the lease extension. The valuation calculation to calculate the premium is complex. Broadly, it is calculated by reference to ground rents and yields and the length of the unexpired term. The Leasehold Advisory Service has a good calculator to calculate the likely cost of the premium.
You will also have your own professional costs, which will be those of your solicitors and surveyors and, in more complex cases, those of a barrister.
Also be aware that, if you serve a notice on your landlord under the Act, you will also be personally liable for the landlord’s reasonable costs that he incurs in connection with:
In addition, there will be the usual costs associated with any conveyancing transaction such as:
If the matter has to go to the First Tier Tribunal (FTT) then your own costs will be higher. Finally, you will need to pay a statutory deposit, which is 10% of the amount inserted in the initial claim notice as being the tenant's estimate of the premium which starts the process.
We would always recommend that you have a formal valuation from a valuer specialising in this field. Even for negotiations, you need to have an idea on how much you are likely to pay. In addition, it is necessary to specify a price in the Initial Notice. If the price is unrealistic this could lead to your Notice being declared invalid or prompt the landlord into litigation which could be costly.
The Act prescribes a timetable for both sides to follow, with any dispute over the terms of the new lease or the premium to be decided by the First Tier Tribunal. That application to the FTT must be made within six months of the landlord's counter-notice. Failure to observe this time limit will result in your claim being withdrawn.
Not necessarily as the Act preserves the lender’s security by effectively swapping their charge from your existing lease to the new lease. However, we would recommend you contact them as an act of courtesy as the Land Registry is likely to alert them to the application to register the new lease and, in any event, you may want to take a further loan in order to pay for the premium and costs.
Provided the seller has owned the flat for more than two years, you can agree with the seller to serve a claim notice and then transfer the rights under that claim to you when you complete the purchase.
This is not uncommon in Central London. The relevant landlord is the one whose interest is long enough to grant the new lease of 90 years plus your remaining length of term. In most cases it will be the freeholder but some blocks may have an intermediate landlord holding a 200 year lease. In this case, it is likely to be the intermediate landlord.
In our experience we advise clients that six to nine months is the norm. If the matter has to go to the FTT, then it will be longer.
This may be your only option if you don’t qualify under the Act. However, in our experience you can end up paying more money than if you bring a formal claim plus you have no control over how fast the landlord will respond. With a formal claim there is a defined timetable with sanctions for non-compliance.
The Act says the new lease has to be on the same terms as the existing lease. However, there are some limited exceptions to this:
If your landlord cannot be found then you will have to apply to the courts for what is known as a "Vesting Order". You will have to prove to the court that you have the right to acquire a new lease and that you have made all reasonable enquiries to locate your landlord but have failed to do so.
If your existing lender is not prepared to make a further advance, then you will have to resort to savings or help from your family.
Whatever you do, do not ignore it thinking the matter will go away. If you fail to respond with a formal landlord's counter-notice within the specified timescale, which is normally two months from receipt of the tenant's notice, you will be forced to grant the new lease at the price set out in the tenant's notice.
You should appoint a solicitor to check that the tenant is entitled to bring the claim and draw up a formal counter-notice. A valuer should also be appointed to advise you on the likely premium to charge. These costs should eventually all be recoverable from the tenant bringing the claim against you.
We shall need the following: