My landlord is refusing to grant me a voluntary lease extension. What can I do?
One of the considerations a leaseholder may well have is how to go about extending their lease. A leaseholder may find themselves in a situation whereby their landlord is refusing to enter into negotiations for an extension to the term of their existing lease and meanwhile, as time is passing, the value of the leaseholder's leasehold interest is diminishing.
Leaseholders should be pleased to know that under the Leasehold Reform Housing and Urban Development Act 1993 (as amended), a leaseholder who has owned their flat for at least two years has a right to an addition of 90 years to their existing lease. A premium is payable to the landlord for the grant of the lease extension. A ground rent of a peppercorn (effectively nil) becomes the new ground rent payable under the lease after the lease extension is complete, regardless of the ground rent in the current lease. The premium payable for the lease extension is negotiated between the leaseholder's and landlord's valuers. Should the valuers not reach agreement as to the premium, the matter may be referred to tribunal for the tribunal to decide the premium payable.
A leaseholder should strongly consider extending their lease before the term of the lease drops to eighty years or below. Where the unexpired lease exceeds eighty years, marriage value is not payable to the landlord as part of the premium. Marriage value is the potential for increase in the value of the flat due to the completion of the lease extension. Part of that value forms part of the premium payable to the landlord on completion of the new lease where the previous term did not exceed eighty years.
As mentioned, the 1993 Act does restrict the right to a lease extension to leaseholders who have been the owners of their flat for a period of at least two years. However, let's focus on a scenario where someone is purchasing a flat. If the seller has owned the flat for a period of two years of more, it may be possible for a buyer to purchase the flat with the benefit of the seller's right under the 1993 Act to a lease extension. In this scenario, the lease extension process would start before the buyer has completed the purchase of their new flat and continue after the buyer becomes the new legal owner of the flat. A buyer of a property, with a view to extending the lease in the near future should consider this route before exchange of contracts of their flat purchase. The reason being that if this opportunity is lost, the buyer will have to wait until he or she has owned the flat for two years before being able to apply for a lease extension under the 1993 Act.
The process of extending ones lease under the 1993 Act is governed by strict statutory timelines, which if not followed by the leaseholder and his solicitor, may jeopardise the leaseholder's right to a new lease or alternatively if not followed by the landlord and his solicitor, may place the landlord in a position whereby he must accept a premium from the leaseholder which is lower than that which he otherwise would be due. However, if followed correctly, this statutory route entitles a leaseholder to a lease extension which he otherwise may not have been granted or perhaps would have been granted, but in exchange for a highly inflated and most unreasonable premium.
For more information please contact Sara Gerrard at [email protected]