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The Lease Extension Process

The path to extending the term of your leasehold interest can be a long one. On average it takes around 11 months from start to finish. The earlier you start the lease extension process, the cheaper the overall costs will be. And remember, as the time passes, so does the diminution in value of your leasehold interest.

Are you eligible?

You must meet the following criteria to be eligible.

  • Owned the leasehold property for 2 years or more, and

  • The term of the original lease must be in excess of 21 years


However the following criteria will exclude your eligibility.

  • The freeholder is a registered charitable housing trust, or

  • The lease is commercial in nature, not residential.

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There are 3 methods to putting a value on the premium

Instruct a surveyor specialising in lease extensions

We recommend that you use a local surveyor with experience in providing lease extension valuations. A regular estate agency will not have the skills and experience to be able to accurately determine the estimated cost of extending your lease.

Download Land Registry documentation to check what other leaseholders have paid to extend their lease with the same freeholder.

For Land Registry account holders, in most cases it is possible to download Lease Extension Deeds where leaseholders and freeholders within the same building have already extended their lease. If you require any further information on this please contact us.

Serving notice on the freeholder

You do not need to serve a notice on the freeholder if you have already come to an agreement on the price to be paid, some people prefer this method to save time; it's called the 'informal route'. If this is not the case then try to attempt to agree the premium first to save time and legal fees. But we would highlight to you that there is risk if the freeholder changes their mind and therefore does not secure your position. Therefore, we would suggest you apply the formal route.

The notice is called a "Section 42 Notice" - governed by s.42 of the Leasehold Reform, Housing and Urban Development Act 1993 "the Act".

The notice must be served on the correct individuals, including the freeholder/landlord and any other party with an interest in the lease, such as a management company.

It must include:

  • The leaseholder(s) full name(s).

  • The address of the leasehold property and correspondence address, if different.

  • Particulars of the lease, such as the date it was granted and original parties.

  • The proposed premium (we recommend making an offer on the low side to allow room for the negotiation stage).

  • Number of years increase (normally an additional 90 years).

  • Any proposed changes to the ground rent.

  • Provide the freeholder with a deadline to submit a counter notice of no less than 2 months from the date of the notice.

We strongly recommend that you instruct a solicitor to submit the notice as any errors could prove costly further into the process. If the notice is withdrawn a further section 42 notice cannot be served until a period of 12 months has expired from the date of the original notice.


Freeholder's demands

Once the tenant has served the notice, the freeholder can:

  • Under s.44 of the Act request access for the purposes of carrying out a valuation with at least 3 days notice. If the property is rented, you will need to discuss this with your tenants to ensure access can be provided on time.

  • Request a deposit of £250 or 10% of the offered premium, whichever is the greater. This must be paid within 14 days. It is good practice to have this money readily available or even send it to your solicitor upon service of the s.42 notice as to avoid any late payment.

  • The freeholder can also request all service charges and ground rent is paid up to date, however this demand can only be made prior to completion of the lease extension notice.

Freeholder serves a counter-notice

The freeholder must serve the counter-notice within the timescale set by the tenant in the s.42 notice, which is usually 2 months after the date of the s.42 notice. The freeholder has the following options available:

  • Admit that the tenant has a right to a new lease.

  • Deny the tenant has a right to a new lease. For example the leaseholder is not eligible (see above).

  • Either of the above however, state the freeholder intends to make an application for an order under s.47(1) of the Act on the grounds that he/she intends to redevelop the premises in which the leasehold property is contained. The freeholder must have clear plans and make an application through the courts if the right to renew is denied.


Negotiation takes place

It is likely that there will be a monetary valuation difference between the premium offered by the leaseholder within the s.42 notice and the counter-offer made by the freeholder. Usually the counter-offer is far higher than the leaseholder's original offer. The two offers can sometimes vary widely. It is advisable to ask the freeholder for a copy of their valuation report to determine if their offer is based on evidence or if the they are trying to obtain an unreasonably high price at the leaseholder's expense.

There is a statutory negotiation period of at least two months but less than six months. This means that the leaseholder cannot apply to the courts for a lease renewal until at least two months has passed since the date at which the s.45 counter notice should have been received, however the application must be made within six months of the s.45 counter-notice. The surveyor's of both the leaseholder and freeholder are normally instructed to carry out these negotiations.

Most parties are able to reach an agreement during the negotiation stage, the minority of cases reach the courts.

Agreement reached?

If the parties are able to reach an agreement, their solicitors will be re-instructed to draft the paperwork and agree on the wording of the lease renewal deed, which eventually all parties will sign.

The leaseholder's solicitor will be asked to provide a legal undertaking (a promise) to pay the freeholder's legal fees at the outset. To enable this, the leaseholder will be asked to pay the expected freeholder's legal and surveyor's costs into their own solicitor's bank account, which will be held there until completion.

The lease renewal deed (and a mortgage deed of substitution, if the leasehold is mortgaged) will be signed by all parties to the lease, the premium and freeholder's legal fees are paid to their solicitor.

The leaseholder's solicitor makes an application to the Land Registry to register the new lease. The Land Registry take on average 12-16 weeks to complete this, however it can be expedited if the leaseholder can provide evidence of a sale or remortgage.


Leaseholder's application to the tribunal

If an agreement cannot be reached, the leaseholder will have no further options available with the exception of making an application to the court.

Provided a minimum time period of two months has passed since the freeholder's counter notice, either party can apply to the First Tier Tribunal (Property Chamber) or the Leasehold Valuation Tribunal (in Wales) to determine the premium of extending the lease by a further 90 years. It is important to note that if you have not agreed terms, or applied to the Tribunal, within 6 months of the date of the counter notice, you will be deemed to have withdrawn your notice. You would then have to wait a further 12 months before you can serve another section 42. notice.

Type of Factors that can affect the Valuation:


Length of Lease

The length of the lease will have a direct effect on its valuation, the longer the lease the higher the final valuation figure will be. As such, determining the exact lease length is key to establishing the total cost of the leasehold extension. Over the years our Surveyors have valued properties with leases ranging from 90 years to those less than 20 years.


Ground Rent

The ground rent is the rent that the tenant pays the landlord each year. With ground rents usually changing a set intervals, or being tied to the Retail Price Index of the property (RPI), having a full understanding of how these can affect the value is key to accurate valuation.


Marriage Value

This is the all important number when it comes to leasehold extension valuations. If the lease length is less than 80 years, the tenant instantaneously pays a higher premium to the landlord. The figure is also dictated by the long lease value of the property, therefore having a thorough understanding of this is key to valuing the property.

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What is Leasehold Enfranchisement?

As the owner of a flat in the United Kingdom you are a leaseholder, with the freehold of the building often owned by another individual or company. They are responsible for managing and maintaining the building as a whole, and will pass the costs on to you and other owners of flats in the building in the form of a service charge. In many cases, the leaseholders of flats prefer to group together to own the freehold of the building themselves; thereby having more of a say in decisions that affect the property, and avoiding the need to negotiate with a third party.

The 1993 Leasehold Reform Act gives leaseholders a right, under certain conditions, to purchase the freehold of their properties (Leasehold Enfranchisement) even if the freeholder doesn’t wish to sell.

Anyone intending to pursue a leasehold enfranchisement should ensure they have finances in place before commencing the process.

The first step in the process is to consult a solicitor to confirm that you meet the requirements for enfranchisement. If you do, the solicitor can then help in preparing the statutory notice that must be served on the freeholder. Unfortunately, recent court cases have established that, if a notice is served with a valuation that cannot be justified, the notice is invalid and the cost incurred in preparing it is therefore wasted. As a result, it is vital that a full valuation is carried out by qualified professionals. They can not only accurately assess the market value of the building itself, but also the value of the freehold given the terms and remaining length of the individual leases.

We are highly experienced in preparing accurate and thorough valuations that can then be used as the basis for serving notice under the Act. In addition, we will work on your behalf throughout any negotiations that follow, ensuring that your interests are represented by professionals with an intimate understanding of the process, law, and factors that affect a valuation.

How does the process work?

After the initial notice is served, the freeholder has a set amount of time to respond. If they do not accept the offer, we will negotiate on your behalf until agreement is reached. In cases where an agreement cannot be reached, it is possible to take the case before a tribunal to make a final determination.

You cannot purchase individual freeholds for flats; rather the freehold for the entire building is bought and sold at the same time. This is done through a Nominee Purchaser who will ultimately acquire the freehold. This could be one of the lessees (leaseholders), a group of them or, as is often the case, a management company formed by some or all of the lessees for the sole purpose of owning the freehold and managing the property.

Am I eligible to purchase the freehold for the building I live in?

There are a number of criteria that must be met in order to have a statutory right to enfranchisement. If these criteria are not met, you may still be able to negotiate to purchase the freehold, or you may have a right to extend your lease. For more information about how Anderson, Wilde & Harris can advise on leasehold extensions, click here.

The criteria are as follows:

  • No more than 25% of the internal floor area of the property must be non-residential.

  • Of the flats, at least two-thirds must be let to ‘qualifying leaseholders’

  • Not less than half of the lessees must participate in the enfranchisement, or both if there are only two flats.

There are specific exclusions for buildings within a Cathedral precinct, National Trust properties, and Crown properties although in practice the Crown has agreed to comply with the principles of the act.

‘Qualifying’ leaseholders are those who own a lease, and are not a business or commercial tenant. There is no requirement for the leaseholder to have actually occupied the flat, so long as they have owned it.

Want to find out more? 

Get in touch with us today.

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