What is a Lease Extension?
A lease extension is a process to increase the length of your existing lease.
Generally, as the lease gets shorter, its value decreases. This depreciation could therefore lead to difficulties in selling the property due to financial uncertainty of how much it will cost to extend. As the lease gets shorter, the cost to extend can increase.
As long as the qualifying criteria is met (outlined below), a leaseholder is entitled to a 90 year lease extension, on top of the remaining term and any ground rent currently payable is reduced to a peppercorn (nil) upon completion.
How do I qualify to extend my lease?
To qualify, a leaseholder must have owned the property for a minimum of 2 years and the original lease must have been granted for a minimum of 21 years.
What is the process for extending my lease?
Instruct a valuer to carry out a full inspection and valuation report which will provide you with an opinion as to the premium payable for the 90 year lease extension and a lower figure for serving the S.42 Notice on the freeholder. The valuation is carried out in accordance with Schedule 13 of the Leasehold Reform, Housing and Urban Development 1993 (as amended by the Commonhold and Leasehold Reform Act 2002).
Once in receipt of the report, instruct a Solicitor (we can recommend one), to serve the S.42 Notice. Once served, the freeholder has up to 2 months to reply with a Counter Notice. When in receipt of the Counter Notice, there is a period of up to 6 months for both valuers to negotiate and agree a premium. If during the 6 months, no agreement is made, and no application to the Tribunal is made then the claim is deemed withdrawn and you would have to wait a further 12 months to start the process again. An application to the Tribunal should be made, via your Solicitor, within the 6 month negotiation period to keep the claim ‘live’.
Are any freeholders exempt from complying with the legislation?
Yes, the following buildings/freeholders are exempt from the legislation:
- Buildings within a cathedral precinct
- National Trust properties
- If the freehold includes any track of an operational railway, including a bridge or tunnel or retaining wall to a railway track
- Crown properties. However, via a separate agreement to the House of Commons, the Crown are prepared to comply with the principles of the legislation.
How can Knight Frank help?
We can assist you by carrying out a full valuation report and negotiating a reasonable price which is payable for the freehold purchase. We also liaise with your Solicitor throughout the process to ensure a smooth transaction. For more information, please call our specialist Leasehold Reform & Litigation Team on 020 7861 5046.