Statutory residential lease extensions – part I – landlords beware

In my time as a property litigator, I have seen many ways in which people fall foul of the seemingly simple rules of the Leasehold Reform, Housing and Urban Development 1993 Act. I say that they are seemingly simple as the truth is very different, with cases often ending up in the Appeal Courts for a determination of what the legislation actually means.

This article is the first of two that we will publish on statutory residential lease extensions pursuant to the 1993 Act. This part focuses on the perspective of the landlord, and part II will be from the leaseholder’s perspective.

The landlord will be most concerned about the lease extension at the beginning of the process, and even before it begins. Why should they be concerned before it begins? All will become clear in just a few moments.

Rather than giving fixed rules as to where a leaseholder must serve their Notice of Claim (which kicks off the lease extension claim), the 1993 Act is permissive in nature. It allows the leaseholder to serve the Notice of Claim at the address specified by the landlord for service of notices, or if no such address is given, at the address specified in rent demands. In practical terms, a solicitor for a leaseholder will not only check the address for service specified by the landlord, but will also the address for the landlord at the Land Registry for the freehold/leasehold title, and also at Companies House (if appropriate). If landlords fail to keep their address details up to date, then their leaseholder may unwittingly send them a Notice of Claim to a landlord’s previous address, and in certain circumstances an unfortunate landlord may be stuck with the terms proposed by the tenant in the Notice of Claim, including, a low premium. Landlords must therefore beware and ensure that their contact details for their properties are kept up to date.

The next concern for landlords is what to do after receiving a Notice of Claim. The first thing to do is get legal advice straight away as missing the deadline for the Counter-Notice can have dire consequences. The four major things that will need to be completed are on receipt of the Notice of Claim are

1. serving notice on the leaseholder requiring them to prove their entitlement to the lease extension – the deadline for making this request is 21 days from service of the Notice of Claim
2. serving notice on the leaseholder requiring them to pay a deposit of £250 or 10% of the premium proposed in the Notice of Claim (whichever is the higher)
3. requiring access to be given by the leaseholder to the flat so that the landlord’s valuation can be undertaken
4. serving a Counter-Notice by the deadline specified in the Notice of Claim.

The most vital deadline of the matters set out above is the service of the Counter-Notice on time. Failure to do so will have the consequence of the leaseholder being entitled to an extended lease on the terms proposed in the Notice of Claim.  Unless the landlord can find a strategy to defeat the validity of the Notice of Claim, then this could result in the landlord losing a substantial amount of money.

I hope that this snapshot is helpful, and further information on the process of the lease extensions will be given in part II, so please do look out for that.