I have received a notice from my tenant seeking a lease extension pursuant to the Leasehold Reform, Housing and Urban Development Act 1993, do I need to respond to it?
The “competent” landlord must serve a counter-notice before the deadline specified in the tenant’s notice if they do not agree to the terms proposed or wish to oppose the grant of an extended lease. Legal advice should be sought to check the validity of the tenant’s notice before responding to the tenant. If a leaseholder rather than the freehold owner has received the notice, it is important to seek legal advice as to whether the leaseholder is capable of granting the lease extension to the tenant.
Can I oppose the lease extension?
Assuming that the tenant qualifies for a lease extension and that their initial notice is valid, a landlord can only oppose the lease extension on the basis that the tenant’s lease is due to terminate within the period of five years from the date the tenant’s notice was given, and the landlord intends, once the lease has terminated, to (i) demolish or reconstruct, or (ii) carry out substantial works of construction, on the whole or substantial part of any premises in which the flat is contained. The landlord will also need to prove that they could not reasonably do those works without obtaining possession of the flat. The landlord should seek legal advice first if they intend to oppose the lease extension.
Does the tenant have to pay a deposit for the lease extension?
Landlords can serve a notice on their tenant requiring them to pay a deposit of £250 or 10% of the premium proposed in the tenant’s notice, whichever is the higher. The deposit is payable by the tenant within 14 days of the landlord’s demand for it to be paid.
Does the tenant have to provide evidence that they are entitled to a lease extension?
Landlords are entitled to serve notice on a tenant requiring them to deduce title to their tenancy. This usually involves the tenant providing Land Registry Office Copy Entries proving that they have been the leaseholder for at least 2 years and a copy of their lease. The landlord can serve this request within 21 days of the tenant’s notice being given and the tenant will have 21 days to respond.
Should a landlord obtain their own valuation for a lease extension?
It is recommended that landlords obtain their own valuation to ensure that they seek the appropriate premium in their counter-notice.
Does the tenant have to allow access to the flat to allow a landlord’s valuation?
Yes, the landlord and anyone authorised by them will have a right of access in order to obtain their own valuation. The right of access is exercisable at any reasonable time, on giving not less than three days’ notice to the tenant.
How long a lease extension is a tenant entitled to?
The tenant will be entitled to a 90 years lease extension in addition to the term remaining on their current lease.
Does the tenant still have to pay ground rent on a lease extension?
No, the ground rent payable under a lease extended pursuant to the statutory procedure will be a peppercorn (i.e. nil)
Does the tenant have to pay any costs on behalf of the landlord for lease extensions?
The tenant will have to pay any reasonable costs on behalf of the landlord. This includes any investigation reasonably undertaken of the tenant’s right to a new lease any valuation of the flat obtained for the purpose of fixing the premium or any other amount payable by the tenant the grant of the new lease. The tenant would not ordinarily be responsible for the payment of the landlord’s costs for an application to the tribunal for the determination of the terms of the new lease and/or the premium payable for it.
What is the benefit of the statutory extension of a long lease?
As a lease becomes shorter, it becomes more difficult to obtain a mortgage. Leases with only 60 to 70 years left to run will be of interest only to a limited number of cash purchasers which shifts the bargaining position in favour of purchasers rather than sellers.
When should a tenant consider extending their lease?
It is important to be aware of when the remaining term of a lease will fall below 80 years because a lease with less than 80 years left will trigger payment of an additional marriage value, which can considerably increase the price.
What are the main qualifying criteria for extending my lease?
The flat must be held under a long lease, i.e. one which was granted for a term of more than 21 years. In addition, the tenant must have been registered as the leasehold owner of the flat for at least two years.
Is a specialist surveyor necessary for a lease extension?
It is advisable to have a specialist surveyor prepare a valuation before the notice claiming a lease extension (‘the initial notice’) is served for two reasons this will provide a better idea of the premium payable for the lease extension, and will help the tenant decide whether to proceed or not the premium proposed in the initial notice must be realistic otherwise the initial notice could be invalid
What happens if an agreement cannot be reached on the premium and/or terms of acquisition?
If the premium and/or terms of acquisition cannot be agreed, the tenant will need to make an application with the tribunal not later than six months beginning with the date on which the landlord’s counter-notice was given, otherwise the initial notice will be withdrawn.
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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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