September 13, 2016

Leasehold Extensions

The Leasehold Reform Housing and Urban Development Act 1993 (as amended) governs the right to an additional term of 90 years, at a peppercorn rent.

This means NO GROUND RENT. The additional 90 years is plus the present unexpired term.

You may be having problems selling your flat due to the short lease.

You might have a clause which will lead to a significant rise in the ground rent. This would certainly affect your ability to sell.

If you are buying a flat with a short lease the current owner may be able to serve & register the Initial Notice. This can then be transferred to you so that you do not then have to wait the two year qualifying period before you can apply to extend.

You cannot extend your lease if:

  • the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions;
  • if the building is within a cathedral precinct;
  • if it is owned by The National Trust.

Crown properties are excluded; although the Crown is not bound by the legislation the Minister has stated to the House of Commons that the Crown will be prepared to comply with the principles of it.

To ‘qualify’ as a leaseholder you must own a ‘long lease’ and have been the owner during the past two years; not as a business or commercial tenant. You do not need to have occupied for this period, simply owned the lease for at least two years.

A ‘long lease’ is defined as:

  • A lease granted for in excess of 21 years.
  • Leases which contain a covenant providing a right of perpetual renewal
  • A lease that ends on death or marriage or a date unknown
  • A leaseholder having held over at the expiry of a long lease, and the landlord has not served a notice terminating the tenancy
  • A shared ownership lease where the leaseholders’ share is 100%

If the Tenant’s Initial Notice has been served it can be assigned with the lease when the flat is sold. This way the owner/ leaseholder, if they meet the requirements etc. can serve notice and sell the flat with the benefit of the notice. The purchaser can then proceed with the application without having to wait the two years. This is of help where a purchaser will not wait to qualify or where a short term lease poses mortgage difficulties.

Recent court cases have decided that offers made in notices that cannot be justified in Valuation Terms render the notice invalid. A Professional Valuation is important not only to ensure that you know what you should pay but also to ensure you do not waste time and money.

You will be liable for the cost of the Landlord for a valuation and for the conveyance but not the hearing or any negotiations.