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Leasehold extensions and enfranchisement claims

When you own a flat with a long lease, you tend to think of it as your property outright.

However, this is not the case – you are still a tenant and when the lease expires, the land reverts to the landlord.

The shorter the time remaining on your lease, the less valuable your property which is why taking swift action to extend your lease can be so vital.

Complex area

Extending the lease in these circumstances is obviously a matter of priority but it’s a complex procedure with legal pitfalls – for both tenant and landlord – and there are strict deadlines to meet.

For straightforward advice, Wards Solicitors’ highly experienced and specialist Property Disputes Team can guide you through the process from start to finish.

Here we outline some basic ‘need to know’ information for both tenant and landlord.

Tenants: When do I need to think about extending my lease?

The value of a leasehold property depends on how many years are left on the lease. The shorter the length of time, the less the property will be worth.

If the lease on your property falls to 80 years or less, the value plummets. This is because getting an extension becomes much more expensive from this point on.

It’s called the ‘marriage value’ and reflects the increase in the market value of the property following the completion of the lease extension.

Am I eligible to extend my lease?

Yes, as long as the lease, when it was granted, was for a term of more than 21 years. It doesn’t matter how long now remains.

You must also have owned the lease for a minimum period of two years.

You cannot apply for a lease extension if your landlord is a charitable trust or if it’s a business or commercial lease.

How do statutory lease extensions work?

Qualifying leaseholders’ have a legal right under the Leasehold Reform, Housing and Urban Development Act 1993 to extend their lease by up to 90 years in exchange for a premium (purchase price) paid to the freeholder, the value of which is based on a set formula.

If you qualify for a statutory lease extension, the landlord or freeholder is not allowed to refuse. However, they may dispute the premium offered.

What happens next?

You will need skilled valuation advice to assess and then pitch the level of your proposed premium.

In broad terms, it will be based upon comparable properties and will reflect the reduction in value to the landlord of effectively losing this asset, the marriage value of an increased term and any losses suffered by the landlord such as the loss of redevelopment potential.

You will also need to:

  • Serve a Section 42 Notice setting out the proposed extension term and premium. It needs to be served on the right parties to be valid;
  • Pay a limited deposit to the landlord. It is refundable, if withdrawn, less reasonable specific categories of costs. You will still be liable to pay some costs even if you withdraw the application.

Landlords: What do I need to do?

After a Section 42 notice has been served by the tenant, you have two months to respond with a counter notice.

This will entail either admitting the tenant has a right to a new lease (agreeing to the proposed terms or not) or not admitting a right at all. You can also oppose on the grounds that you intend to redevelop.

It’s vital you take action within this time frame. If you don’t, you risk losing any control over the premium that is paid to you and being bound to the grant given to the leaseholder.

The term and premium can of course be agreed, and it is recommended that the parties each use their own valuers to negotiate and explore a solution. If that fails, then a court can make a decision.

Leasehold dispute resolution – when you can’t agree

Once the landlord has served a counter notice, either party can apply to the Leasehold Valuation Tribunal for an independent decision.

A number of procedures and time limits come into play and specialist legal advice at this point is highly advisable.

Get in touch

For further advice and guidance in this area, please contact Leasehold Extension Dispute specialist Ian Williamson on 0117 929 2811 or ian.williamson@wards.uk.com.

Or click here to see our acclaimed Residential Property Disputes Team.

You can find your nearest Wards office by clicking here.

Why us?

Our specialist dispute resolution lawyers have years of experience in all types of property dispute, advising home owners, landlords and tenants.

We’re known and respected for our straightforward, pragmatic approach and we’ll talk you through your options, working with you to find the best solution for your particular situation.

Wards Solicitors’ specialist Disputes Team is singled out for praise in the 2020 Legal 500 Guide.

‘Over the years I have needed legal advice on a range of matters and have never hesitated to use Wards. Every team member in whichever discipline has always proved to be not only an expert in their field but very reactive to the exact needs of the client.’

‘Extremely empathetic, professional and very approachable.’

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