DO YOU OWN A FLAT IN A BUILDING WITH BUILDING SAFETY PROBLEMS?
DO YOU BENEFIT FROM THE LEASEHOLDER PROTECTIONS?
(1) ARE YOU THINKING OF EXTENDING YOUR LEASE?
- BEWARE!!
YOU COULD LOSE THE BENEFIT OF THOSE LEASEHOLDER PROTECTIONS!!
PLEASE SEE MY NOTE ON THIS ON MY APRIL 2023 LATEST NEWS PAGE VIA THE BELOW LINK:-
HOW DO I DO IT?
EXTENDING A LEASE UNDER THE
LEASEHOLD REFORM HOUSING & URBAN DEVELOPMENT ACT 1993 (AS AMENDED)
A residential Leaseholder who has owned their Flat for two years or more has the statutory right to extend such Lease by a further 90 years and there is a formal procedure which has to be followed. Any such Extension Lease granted would ultimately be on the following basis:-
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have a Lease Term of the current unexpired part of the original Lease Term plus a further 90 years (for example, if there was then 69 years remaining under the original Lease Term, the Extension Lease will be granted for a Term of 69 + 90 = 159 years)
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be at a peppercorn rent (i.e. in effect, no ground rent is payable).
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be on the same terms as the existing Lease, subject to minor modifications and certain statutory exclusions and additions
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be granted subject to a premium (i.e. a purchase price) would be payable to the Landlord (based upon a statutory valuation formula) – the less years remaining of the original Lease Term, the more expensive the Lease Extension will be and in particular, savings can be made if there are still over 80 years remaining of the original Lease Term
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be granted on the basis that the Leaseholder would have to pay the Landlord’s reasonable legal and surveyor’s costs in relation to the statutory process and the completion of such Lease Extension.
There can be quite a discrepancy in the premium (i.e. the price to be paid) payable to a Landlord for a Lease Extension (even for properties in the same block) and the amount payable will ultimately come down to the Leaseholder appointing a solicitor/surveyor to act on their behalf who knowns their stuff and is a good negotiator.
It is very important to take appropriate advice and seek to establish the likely price you will have to pay to the Landlord for such a Lease Extension before embarking on the statutory procedure to extend your Lease – a simple check can be made as to whether the Landlord has already granted Extension Leases for properties in your Block and what price was paid, by obtaining a copy of the up to date Freehold Title Entries to your Block from the Land Registry – these will show if there have been any such Lease Extensions granted and in relation to which Flats – you can then go on to obtain a copy of the relevant Extension Lease or Deed of Variation from the Land Registry, which will show the price paid
It may well be that a collective approach by a number of Leaseholders for a Lease Extension would be beneficial and enable savings to be made on solicitor’s/surveyor’s fees incurred by them
There now follows a general outline of the procedure which needs to be undertaken to extend your Lease under the statutory procedure
1. A Notice (a Section 42 Notice) has to be served by the Leaseholder upon the Landlord requesting an extension of their Lease and such Notice will state the price the Leaseholder is offering to pay the Landlord to extend their Lease
2. Under such Notice the Landlord is given a period of not less than 2 months to serve a Counter-Notice upon the Leaseholder – by sending such Counter-Notice the Landlord will tell you whether or not they accept that you have the right to extend your Lease and also whether they agree to the price you have offered or (in most cases) suggest a higher price - you should note that, after receiving the Leaseholder's Section 42 Notice, the Landlord is entitled to request that the Leaseholder pays to them a deposit, which will usually be 10% of the price offered by the Leaseholder or £250, whichever is higher
If the Landlord rejects the Leaseholder’s claim then the Landlord has to apply to Court within 2 months of the date of the Counter-Notice for an order that the Leaseholder has no right to acquire an extended Lease -if the claim is unsuccessful then the Lease Extension procedure will carry on
3. Depending upon the Landlord’s response to your Notice then, unless the Leaseholder decides not to proceed (in which case they will be responsible for the reasonable legal and surveyor’s costs incurred by the Landlord up to that point), the matter will proceed in one of the following ways:-
3.1 The Landlord accepts the Leaseholder’s claim and the price the Leaseholder is prepared to pay and lawyers are then instructed to document the Lease Extension or
3.2 The Landlord accepts the Leaseholder’s claim but does not agree to the price the Leaseholder is prepared to pay, in which case further negotiations will take place to try to agree upon a ‘compromise’ purchase price. If agreement still cannot be reached then either party has the ability to apply to the First Tier Tribunal (in England) or the Leasehold Valuation Tribunal (in Wales) for them to make a determination as to the price which should be paid – once that price has been determined then lawyers can then be instructed to document the Lease Extension
4. One important point which needs to be noted is that if within 6 months of the date of the Landlord’s Counter-Notice the parties have not agreed the terms for the Lease Extension (including the price to be paid) nor has either party made an application for determination to the First Tier Tribunal or the Leasehold Valuation Tribunal (as appropriate) then the Leaseholder will be deemed to have withdrawn their Section 42 Notice – not only will they then be responsible for the Landlord’s reasonable legal and surveyor’s costs incurred by the Landlord up to that point, they will then have to wait a further 12 months before they can serve another Section 42 Notice and start the process all over again
5. If the amount of the Landlord’s costs is disputed, the Leaseholder has the ability to refer these also to the First Tier Tribunal or the Leasehold Valuation Tribunal, as appropriate, for a determination as to their reasonableness
Finally, a word of caution - whilst not seeking to tar them all with the same brush, not every Freeholder/Landlord will act in an honourable way when it comes to statutory Lease extensions
The Leasehold Knowledge web site has a useful article on some of the 'dirty tricks' which they can seek to use to frustrate and delay the process - here is a link to the article: The dirty tricks in formal lease extensions