Property Entrepreneurs

FAQs - Extending the length of a flat's residential lease

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.

What is the relevant legislation?

Leasehold Reform, Housing and Urban Development Act 1993 (the Act).

What are the qualifying criteria?

The main ones are as follows but it should be noted that there are a number of exceptions:

  • the flat must be held under a long lease ie it was originally granted for a term of more than 21 years
  • the flat must have been owned by you for more than two years. This date starts from when you are registered as the owner at the Land Registry.

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.

What are some of the exceptions?

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.

Why should I extend?

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 will pay more to extend your lease if your lease term has less than 80 years left. This could be significant.  It is normally advisable to extend before your lease reaches this limit.
  • lenders do not like short residential leases.  You are likely to encounter difficulties if you want to sell your flat if the unexpired term of your lease is less than the criteria set by most lenders.  Different lenders have different criteria but generally they are looking for an unexpired term of at least 60 years.

How long can I extend my lease for?

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.

How much will it cost?

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:

  • any investigation that the landlord is required to carry out to check that you qualify for the right to a new lease
  • obtaining a valuation of your flat
  • negotiating and granting a new lease to you. 

In addition, there will be the usual costs associated with any conveyancing transaction such as:

  • Stamp Duty Land Tax (depending on the price you pay)
  • Land Registry fees
  • disbursements such as search fees, which in London are typically £300 - £400.

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. 

Will I need a valuer?

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. 

What happens if there is a dispute?

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.

I have a mortgage over the flat.  Do I need to advise the lender that I wish to extend my lease?

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.

I am considering buying a flat which has a shortish length of term.  What can I do?

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.

My building has more than one landlord so what do I do?

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.

How long will the whole process take?

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. 

What about negotiating with the landlord outside the statutory procedure?  What are the pros and cons of this?

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.

What about the terms of the extended lease – are these the same as the existing lease or can they be varied?

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 the existing lease includes property which is not to be included in the new lease
  • where physical alterations have been made to the property since the existing lease was granted
  • where the service charge provisions were drawn defectively so the landlord cannot recover the full cost of repairs or insurance.

What if my landlord is missing?  How do I find out who the freeholder is?

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.

What about financing the lease extension?

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.

I am a freeholder/landlord and have received a notice from my tenant claiming a new lease. What shall I do?

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.

What information do you need from me as a tenant in order to bring a claim?

We shall need the following:

  • details of your ownership of the flat; usually a Land Registry title will be sufficient
  • a copy of your lease
  • details of your landlord; again a Land Registry title of the landlord's interest will do.  If not then a copy of your last rent/service charge demand which should have your landlords details
  • your ID – we need to see your passport and a recent utilities bill to prove residence.

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