Legal right to extend lease

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Since 1993 Leaseholders have been able to claim a 90-year lease extension at a reduced ground rent of £1.00/peppercorn if demanded.  Lessee's rights have become more accessible.  For example, you now only need to own the lease for 2 years, do not need to live in the property and can own it through a company.

The prospect of extending your lease may seem like a daunting task especially if your Freeholder has disappeared. Don't worry, as the County Court can grant a "vesting order" to get over this hurdle.

The first stage is to make sure you gather all the relevant paperwork.   The lease is likely to be required by the valuer to calculate your future ground rent commitments.  Also, check the last ground rent demand to see who your ground rent is being paid to.

To serve notice the lessee needs to state their lease details and the premium that they would like to pay for the lease extension.  To know what premium you should quote on your notice requires specialist valuation advice. Your notice could be invalid if you do not pass certain legal tests, one of which is satisfied by you having taken valuation advice.

A lease extension valuation requires more elements than a typical mortgage valuation as there are 13 input factors. A good valuation report should include calculations to show you how the premium is made up, an explanation of the methodology and comparable market transactions or case law evidence on which your valuer has relied.

Before serving Notice, many lessees commence informal discussions with the freeholder, especially if they live in the block. This can't really put you at a disadvantage but some landlords will simply refuse to enter discussions without a formal notice as this protects their position as to costs.

If you are proceeding informally you will need to ensure that the Freeholder is quite clear that it is your Section 42 rights you are seeking.  A claim notice fixes the valuation date (date of notice) and establishes that it is a 90 year extension you are claiming.

Ringley advise that of their 300+ cases a year, premiums can still be agreed informally, and of the half negotiated after service of a claim notice, only about five percent end up at the Leasehold Valuation Tribunal.  There are 13 variables to be agreed and three components of the valuation to be established.  Some variables like ground rent are fact; others are based on property and financial market evidence or case law such as the long and short lease values.

A Supplementary Lease and Dead of Variation is the legal instrument that extends your lease. The lessee's rights are to vary the ground rent and the term. The Freeholder cannot force you to agree to changes to other clauses. Your old lease does not get ripped up.  It is sometimes here that leaseholders who went down the informal route become unstuck when the Freeholder suggests that whilst the premium is agreed, they do not agree to the ground rent being reduced.

If you have a mortgage it is necessary to obtain your mortgagees consent and the Supplemental Lease and Deed of Variation will need to be registered at HM Land Registry to become part of your properties title. There is a nominal registration fee and stamp duty land tax form to be filled in.

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02/09/2020
Author : Mary-Anne Bowring

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