How to extend a lease agreement

January 2, 2023

4899

How to extend a lease agreement

Not every lease is the same but if you have a lease that has just over or just under 80 years will determine how costly and time-consuming extending a lease can be. So, how to extend a lease agreement?

Check the Leasehold Reform, Housing and Urban Development Act 1993.

Follow our guide:

Lease extensions (flat):

You will be liable for the Landlord (Freeholder or their Managing Agent) reasonable legal and surveying costs (which may be roughly similar to yours).

You may not extend your lease if the building is owned by the National Trust or if the building is within a cathedral precinct or if the Landlord (Freeholder or their Managing Agent) is a charitable housing trust.

Seek legal advice before you enter into any form of agreement and use caution when purchasing a Leasehold property.

Over 80 years on the lease:

If your property has over 80 years left on the lease and you have owned it for two years on a long lease (for longer than 21 years), then you will be able to extend the lease by a further 90 years with a zero ground rent known as a “peppercorn” rent. The Leasehold Reform Housing and Urban Development Act 1993 (as amended) governs this right to extend.

1. Write to your Landlord (Freeholder or their Managing Agent) setting out your intention of executing your right to extend.

2. Obtain the services of a local surveyor. You should instruct your surveyor to provide a valuation for lease extension purposes for you to send to your Conveyancing Solicitor.

3. Obtain the services of a Conveyancing Solicitor. Your Conveyancing Solicitor will check that you are entitled to a lease extension, they will then draft and serve the Initial Notice on the Landlord (Freeholder or their Managing Agent), negotiate and agree on terms with the Landlord (Freeholder or their Managing Agent) and once the counter-notice has been received and if required, they will apply to the LVT to protect your claim if any problems. They will complete the lease extension once all terms have been agreed and register it at the Land Registry.

Under 80 years on the lease:

If your property has under 80 years left on the lease you will need to negotiate with your Landlord (Freeholder or their Managing Agent) for a minimum of at least an additional 125 years. You will have pay what is called a marriage fee on top of all the other costs (a marriage fee is half the increase in the value of the property and the longer lease).

If owned flat more than two years:

1. Write to your Landlord (Freeholder or their Managing Agent) asking them to provide a cost of extending the lease (including their reasonable legal and surveying costs).

2. If you feel the amount is too high, try to negotiate with the Landlord (Freeholder or their Managing Agent) to see if there is any movement in the price.

3. If that fails, obtain the services of a local surveyor if you feel the price is over-inflated. You should instruct your surveyor to provide a valuation for lease extension purposes for you to send to your solicitor.

4. Obtain the services of a Conveyancing Solicitor. Your Conveyancing Solicitor will check that you are entitled to a lease extension, they will then draft and serve the Initial Notice on the Landlord (Freeholder or their Managing Agent), negotiate and agree on terms with the Landlord (Freeholder or their Managing Agent) and once the counter-notice has been received and if required, they will apply to the LVT to protect your claim if any problems. They will complete the lease extension once all terms have been agreed and register it at the Land Registry.

If owned flat less than two years:

1. Write to your Landlord (Freeholder or their Managing Agent). Ask them to provide a cost of extending the lease (including their reasonable legal and surveying costs).

2. You may receive an over-inflated offer, see if you can negotiate with the Landlord (Freeholder or their Managing Agent) to bring it down in any way.

3. If you can’t, you may want to have your solicitor have a go on your behalf.

4. If this doesn’t work and you feel the cost is too high, you can then go down a more formal route where the Landlord (Freeholder or their Managing Agent) has to respond to you within certain timescales.

5. Obtain the services of a local surveyor. You should instruct your surveyor to provide a valuation for lease extension purposes for you to send to your solicitor.

6. Obtain the services of a Conveyancing Solicitor. Your Conveyancing Solicitor will check that you are entitled to a lease extension, they will then draft and serve a Section 42 Notice on the Landlord (Freeholder or their Managing Agent). The Landlord (Freeholder or their Managing Agent) will have two months to respond to the Section 42 Notice, they may ask for more information. In any event, all correspondence on both sides should be responded to within 21 days. Your Landlord, (Freeholder or their Managing Agent) will serve a counter-notice acknowledging your right to extend but may disagree with your offer. Negotiations will now be in full swing between both parties and you should both eventually reach an agreeable figure. If a figure is not agreed both parties have the right to have the matter referred to a Leasehold Valuation Tribunal. The tribunal will come to a decision and the judgement will become effective within a 28 day period. The Landlord, (Freeholder or their Managing Agent) will then provide a new draft lease within a further 21 days. A new lease then will be drawn up within two months.

7. The Conveyancing Solicitor will then complete the lease extension once all terms have been agreed and register it at the Land Registry.

Leasehold extensions (House):

A leasehold house is slightly different to that of a leasehold flat. With a leasehold house, you may not have to extend your lease (depending on the type of house you own). You should expect your ground rent to increase. You may have the right to extend the lease to 50 years within the following conditions:

1. You need to have owned the property for two years; and
2. You need to have owned it on a long lease (for longer than 21 years).

If you live in a converted house, you may have to apply for a lease as with a leasehold flat.
Leasehold houses are rare so for more advice, contact The Leasehold Advisory Service.