Written by Jodie Gent on Friday, December 14, 2018
If your Lease only has between 70-90 years remaining you should start to think about extending your Lease. Thankfully the law gives Leaseholders the statutory right to extend their Lease, therefore increasing its value.
The Leasehold Reform, Housing and Urban Development Act 1993 (the Act) gives a Leaseholder the right to extend their Lease by a further 90 years and reduce the ground rent to “a peppercorn” (meaning no ground rent payable). This right however is subject to compensation known as “a Premium” (calculated by a specific formula) and the Landlord’s legal fees and Surveyors costs.
In order for a Leaseholder to take advantage of this right, they must have owned the flat for a period of at least 2 years (although the act contains a provision to assign the benefit of previous ownership on sale).
The Lease extension process is clear although there are a number of potential pitfalls which if caught by could prejudice a Tenant’s right to extend by a further 12 months.
A few easy tips to avoid these traps are as follows:
Alternatively, a Leaseholder can approach their Landlord to consider extending their Lease on an informal/voluntary basis (outside the act). There are no legal requirements as to the terms of the Lease, however it is usually negotiated for the grant of a new Lease of 125 years and subject to a higher premium and increasing ground rent. This is especially beneficial to non-qualifying Leaseholders i.e. if they have not owned the property for the statutory period of 2 years.
Jodie works in PDC Law’s enforcement team. The team assists clients to enforce County Court orders and FTT determinations by seeking forfeiture of leases and by obtaining Orders for Sale. Jodie joined the firm in 2019 having graduated with a BA (Hons) degree having worked in the property industry since 2016.close