A lease is known as a 'dwindling asset' in the sense that, with every year that passes, the lease will become shorter.
If it becomes too short, you may find it difficult selling or mortgaging the property when the time comes. This is why you may need a lease extension.
Individual long leasehold tenants have the right to extend a lease on their property. A leasehold extension will have the effect of extending the term (i.e. the length) of the lease to ensure that the property can be sold to a buyer, or mortgaged in accordance with the Bank's requirements. Generally, when the lease drops much below 80 years, then you should be considering a lease extension. In this blog, we explain lease extensions in further detail.
Why Should You Get a Lease Extension?
Many clients do not think about the length of their lease until they are looking to sell or mortgage. We would always advise to start the procedure of extending the lease early, to ensure that you do not fall into complications when the time comes to sell, or your mortgage offer expires.
The lease extension process can be very quick and painless in some circumstances. Where the terms of the extension (predominantly the premium, the length of the extension, and the ground rent) can be agreed between freeholder and leaseholder directly, it is simply a case of the solicitors drafting the deed which will document the parties' intentions and agreed terms.
Where the terms of the extension (the premium, the length of the extension or the ground rent provisions) cannot be agreed by direct negotiations then, provided that certain qualifying conditions can be met, the leaseholder may have a statutory entitlement to extend their lease.
How Does a Lease Extension Work?
Long leaseholders of flats have certain rights to pursue a lease extension under the Leasehold Reform, Housing and Urban Development Act 1993.
There is a very strict procedure which must be followed from the outset – one our qualified solicitors can advise on at every step – to ensure that the procedure is followed correctly and there is no dispute over your entitlement to exercise your rights. There are other procedures to follow for leasehold houses, which are generally less common.
The process can take anything from a few weeks to a year. If the terms of the new lease cannot be agreed, then there is provision to have any matters in dispute resolved by an expert Tribunal.
If the terms of the lease have been agreed, but the lease has not been completed, then there are ways to ensure that the agreed terms of the lease extension are affected.
Generally speaking, you will not only be liable for your own costs in a dispute, but also those of your freeholder.
It is also strongly advised to have a surveyor on board from the outset. They are best placed to advise on the 'premium' of the new lease (i.e. how much the leaseholder will pay for the extension) and enter negotiations with the freeholder's surveyor in respect of potential settlement.
Are You Looking to Extend Your Lease?
If you are considering a lease extension – or buying or mortgaging a property with a short lease – then please contact our qualified solicitors who will be able to advise you on your rights and entitlements as long leaseholders in respect of lease extensions.
We also have experience in dealing with lease extension claims on behalf of the freeholder, where they have been served with a Statutory Notice by their long leaseholder. We can ensure that a fair premium is reached, and a reasonable capital sum is reflected to ensure that the investment value is not unduly diminished.
Alternatively, learn about our Lease Extension services here on our website.