The lease extension process explained
Lease extensions can seem tricky at first glance. This brief guide will equip you with basic knowledge of the process, where to start, and help you figure out what questions to ask along the way.
YOU HAVE A RIGHT TO A LEASE EXTENSION
If you have owned your flat for more than 2 years, you are legally entitled to a lease extension of 90 additional years (that is, 90 years on top of what you have left now), with a peppercorn (nil) ground rent. This means that the freeholder is obliged to grant you a lease extension – the only matter to be agreed is how much you pay.
A PROCESS OF NEGOTIATION
There is a ‘statutory calculation’ set out in the law as to how a lease extension should be valued. The calculation is, however, subject to a number of variables. This is what makes it a process of negotiation. The leaseholder makes an offer to the freeholder at a lower level, the freeholder comes back with a higher counter-offer, and then the two parties negotiate towards each other until an agreement is reached.
STEP 1: VALUATION
How do you know how much a lease extension will cost? Or, how much to offer? That’s where we come in.
We can undertake one of our comprehensive, professional valuations; providing bespoke, expert advice and giving you a valuation to accompany your offer to the freeholder, as well as a valuation for what we think you will ultimately pay, post-negotiation stage.
STEP 2: MAKING AN OFFER
Once you have read our report, you will be in a well-informed position to enter into negotiations with the freeholder. Making an offer can be done in one of two ways:
1. Formally, by instructing a solicitor to serve a Notice under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 – which claims your right to a 90-year lease extension at a peppercorn ground rent, and states the proposed premium. The freeholder is then given a deadline by when they must respond with a Counter Notice (served under Section 45) which states whether they accept or reject your claim, and how much they propose you pay.
2. Informally, by way of written correspondence. Outside of the provisions of the relevant Act, you and your freeholder are free to come to whatever agreement you like, and you can make a written offer for the equivalent of a statutory lease extension (i.e. 90 additional years without a ground rent), or you can propose different terms. These types of negotiations should always be entered into having taken professional advice, and with caution.
STEP 3: NEGOTIATION
Once a counter-offer has been made, either by way of Counter Notice or return correspondence, the negotiations commence.
myleasehold provides professional negotiation services, drawing on our extensive experience and tactical valuation expertise to obtain the best deal possible for your lease extension.
STEP 4: PREMIUM AGREED, LEASE EXTENDED
Once a premium has been agreed, the new lease will be granted through yours & the freeholder’s solicitors, barring any additional lease term negotiations.
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We understand that the ‘legalese’ and industry-specific terminology can be confusing. If this section of our site leaves you perplexed, please contact us today by phone or email – or the instant chat widget at the bottom of this page! – and one of our customer service advisors will be happy to answer any questions you may have.