Lease Extension

LEASEHOLD REFORM HOUSING & URBAN DEVELOPMENT ACT 1993 (as amended)

If you own a long leasehold interest in your flat, you may qualify for the statutory right, under the provisions of the 1993 Act, to extend the lease by 90 years (ie, 90 years in addition to the term currently remaining).  The Act requires that certain prescribed information is included in the Notice of Claim: omitted or incorrect information could invalidate the claim. Therefore, if you propose to seek an extension, it would be advisable for you to consult with either a solicitor or a surveyor who is familiar with the required procedures.

The basic process is set out below, for guidance purposes only, and as mentioned above, you are advised to seek professional advice from a solicitor or surveyor.
 

Qualification
 

In order to qualify:

• Your property must be a flat
• Your current lease must be a long lease (ie, for more than 21 years when granted)
• You must have owned the flat for more than two years (the ownership period runs from the date that your interest was registered at the Land Registry).
  
   

Notice of Claim – S42 Notice
 

• The Notice of Claim must be served on the Competent Landlord, and any third party to the lease (ie, management company): copies to be served on any intermediate landlord.
• You must propose a realistic premium for the lease extension, including the compensation proposed for every intermediate interest that is affected financially.  In practice, you will need to seek your own valuation advice prior to making the claim. An unrealistic figure may invalidate the claim.
• The S42 Notice must include a deadline date for the Competent Landlord’s counter notice which must be not less than two months from the date that the claim is received.
   

Counter Notice
 

• On receipt of the Notice of Claim, the Estate Office will invariably instruct external solicitors to advise on validity and legal matters, and negotiate the terms of the extended lease.
• Likewise, the Estate will instruct external valuers to advise on the financial terms and negotiate the premium to be paid for the extension.
• You will be required to pay the statutory deposit (10% of the aggregate figure proposed in the S42 Notice) and to provide proof of title. If you are an underlessee, it will be necessary to send our solicitors a certified copy of your current underlease.
• The Counter Notice will say whether the claim is accepted or declined. If accepted, the Counter Notice will confirm which proposals in the S42 Notice are accepted, and will give counter proposals for those not agreed.
   

Settlement/Determination
 

• Since the provisions of the 1993 Act were brought into force, the majority of extension claims have been successfully negotiated between claimants’ and the Estate’s advisers and amicable settlements reached. However, if it is not possible to agree the premium or any of the terms of the extended lease, either party can apply to the FTT (First Tier Tribunal [Property Division]) for the matter to be determined.
   
• The FTT usually makes its determination after a formal hearing at which each party can put forward its case. However, if considered appropriate, and both parties agree, the FTT may decide the matter on documents alone.
   
• If the claimant is an underlessee, and compensation is payable to the intermediate headlessee, the latter may elect to be separately represented at any hearing or determination.
   
• The FTT is not generally able to award costs: therefore, each party will be responsible for its own costs whatever the outcome of the hearing or determination.
   

General Information
 

• In many cases there may be a headlease on the whole property, and the headlessee will be your immediate landlord. However, unless the headlessee is able to grant the 90 year extension out of its current interest, the Estate will be the Competent Landlord for the purposes of the 1993 Act extension claim.
   
• As the Competent Landlord, the Estate will grant the extended lease, but the headlessee will remain as your immediate landlord for the balance of the headlease term (ie, until the headlease expires).
   
• By making the formal extension claim under the provisions of the 1993 Act, you will be responsible for the landlord’s (including any intermediate landlord’s) reasonable legal and valuation costs, whether or not the extension claim proceeds to completion.
   
• Once a valid extension claim has been made, the benefit of the claim can be contemporaneously assigned with your current lease (or underlease) under which the claim has been made. Your assignee will thereby be able to take over the claim and will not have to wait for two years to qualify.

This note has been prepared as a general guide only, and does not constitute advice on any matter and should not be relied upon.

The procedures and regulations for statutory lease extensions are complicated.
It is recommended that you consult a solicitor and/or valuer for your own independent advice prior to making any claim.