Lease Extension Process Explained

The first step is to gather all the necessary documentation including the existing lease from when you purchased the property. Additionally, you’ll need proof of property ownership such as a land registry title. If you do not have these, you can apply through the land registry website.

You should identify the competent landlord (person with an active interest in the property), who is often the freeholder. They will be the ones with the authority to handle the lease extension. If the landlord is a head leaseholder (someone with a longer lease on the property than the leaseholder), their lease must have at least 90 years remaining. If their lease only has a few months or years left, you will need to identify another landlord, ideally the freeholder.

Hiring experts is essential when navigating the lease extension process. One of your first steps should be to engage a solicitor who will handle serving the necessary notice to the freeholder, managing agent, or competent landlord. They will also manage communications and respond when the landlord's solicitor replies.

Next, consider hiring a valuation surveyor, who will assess various factors to calculate the value of your lease extension. These factors include:

• The remaining length of the lease
• The property’s location
• Ground rent
• Lease terms
• The property’s value with and without the extension

It's crucial to select experienced professionals for each stage of the process. For added assurance, consider choosing a member of the Association of Leasehold Enfranchisement Practitioners (ALEP). Members of ALEP are specialists in leasehold properties and adhere to a strict code of practice, ensuring a high standard of service.

You must serve the competent landlord with a statutory notice (section 42 notice) that includes your opening offer. While you can handle this yourself, it’s not advisable. Errors or omissions in the notice can lead to your request being rejected by the court, potentially preventing you from reapplying for an extension for another year.

To avoid these pitfalls, it’s highly recommended to work with an experienced solicitor. They are well-versed in the necessary legal requirements and will ensure the notice is completed accurately and thoroughly.

Once you have served the notice to the competent landlord, they will have 2 months to respond with a counter-notice (section 45).

The following are some of the outcomes you can expect:

• Accept the offer - under the terms offered
• Counteroffer - with new terms
• Rejection - if certain criteria are not met
• Rejection - for reasons such as looking to redevelop, this results in a tribunal

Once you have agreed to the terms of the new lease, you will need to agree to a date for completion. You must pay any costs associated with the lease extension, including premiums paid to the freeholder.

Once these costs have been paid, you can then register the section 42 notice with the land registry. Your solicitor can then carry this out for you. You may be required to inform your mortgage provider and get the lender's consent.

Though rare, some houses are leasehold and you can buy the freehold from the owner. You may wish to do so if you have owned the property for a significant amount of time and wish to own the freehold outright.

One of the many issues around trying to purchase the freehold is valuation. Whilst both parties can get valuations of their own, there may be a difference in figures. There are several requirements to be eligible to purchase the freehold, these include:

• The property must be a house
• Lease must originally have been for a minimum of 21 years
• Current leaseholder and owned for at least two years

The majority of leasehold properties are flats. There can often be multiple flats in a building owned by the same freeholder. If you wish to buy the freehold on your flat, you will need to do so with the help of other leaseholders in the building.

Collective enfranchisement requires the leaseholder and building to qualify through various conditions. These include:

• 50% of flats must take part. If there are only two flats in the building, it requires 100% participation
• Two-thirds of the building needs to have had initial leases of a minimum of 21 years
• A 25% or less of the internal space is used for non-residential use

If you have exhausted every option and cannot find the competent landlord, there is an alternative option. You will need to apply for a vesting order to the relevant county court. A vesting order helps you obtain a new lease if the courts feel you are eligible for one.

A tribunal normally follows, which determines the premium you should pay. The courts will then hold this premium until a competent landlord appears at such a time.

There may be disputes surrounding the premium or the terms of the extension. If the dispute is greater than the two-month counter-notice deadline, then either party can apply to the First-tier Tribunal (Property Chamber) or Leasehold Valuation Tribunal (for Wales) to have the matter resolved.

The application must be made within six months following the date of the counter-notice. Otherwise, the claim is dismissed and a section 42 notice cannot be made for a further 12 months.

You may use the informal extension route, as this does come with reduced fees including legal costs. But, there are multiple reasons why this can go wrong. The lack of legal protection is the main reason, with the legal right to extend by a certain amount and at the cost of zero ground rent.

Another reason is determining the amount of premium that is paid to the freeholder/landlord. Statutory extension sets a clear guideline for how a premium is calculated, using the informal route avoids this.

It is always best to follow the statutory guidelines for a lease extension. This provides legal protection and ensures that any agreement is calculated correctly.