The Right to Extend Your Lease

As leases shorten (for example, 40-60 years in some London areas), leaseholders must be aware of their legal right to extend their lease. This right, which has existed since 1993, allows you to add 90 years to your current lease term, with ground rent reduced to a peppercorn (essentially a nominal amount). Over the years, legislation has evolved to make this process more accessible, with relaxed qualification criteria. Notably, you no longer need to live in the flat for two years before claiming this right.

The Lease Extension Process

The process of extending your lease can seem overwhelming, but by following a clear procedure, you can achieve it. The first step involves serving a formal legal notice on the freeholder and intermediate landlords, notifying them of your intention to extend.

Here’s how to get started:

• Ensure you have all necessary paperwork, such as a copy of your current lease and last ground rent demand.
• The valuer will need this documentation to calculate your future ground rent and verify title searches.

In situations where the freeholder has disappeared, a process called a Vesting Order ensures you can still extend your lease.

Informal vs. Formal Discussions

You can choose to begin the process by opening informal discussions with your landlord. While this won't put you at a disadvantage, some landlords may prefer formal notice to protect their position regarding any legal or financial advice they need to seek. It may be beneficial to have a conversation with the landlord, especially if they live in the block, as it could be advantageous for both parties.

When engaging in informal discussions, make sure the landlord understands you're negotiating under your Section 42 rights.

Serving a Section 42 Notice

Serving a Section 42 Notice is an essential step in claiming your statutory right to extend the lease. The notice must specify:

• Details of your lease
• The premium (cost) you're willing to pay for the extension.

Before serving this notice, it's crucial to get specialist valuation advice. This helps ensure the notice is legally valid, as failing to do so could invalidate the process. A proper valuation involves 13 input factors and includes comparisons to market transactions or case law evidence.

Valuation and Choosing the Right Surveyor

The valuation process for a lease extension is complex, with various factors affecting the premium. When choosing a valuer, ensure they have appropriate expertise. Avoid using unqualified surveyors, as this could lead to issues down the line. A good valuation report will clearly explain the methodology and provide calculations, making the process more transparent.

According to the Ringley Group, around 50% of premiums are negotiated informally, and only 5% of cases end up at the Leasehold Valuation Tribunal.

Legal Documents: Supplemental Lease and Deed of Variation

Once the premium is agreed upon, the Supplemental Lease and Deed of Variation are the legal documents that extend your lease. These documents will amend two key terms of your lease: the ground rent and the term. It’s essential to note that the freeholder cannot change other lease clauses without your agreement.

If you have a mortgage, your lender must also consent to the lease extension, as it affects the property’s title. This is usually a formality, as mortgage companies typically approve deeds that increase the property's value.