We are intending to sell our leasehold flat but understand that the lease term may need to be extended. Please, can you explain how we go about this and what is involved?
You can extend your lease under the statutory provisions of the Leasehold Reform Housing & Urban Development Act 1993 (‘LRHUDA 1993’) if you have owned your flat for a minimum of two years (N.B. you do not need to have lived at the flat during this period).
Alternatively, you can approach your Landlord to ascertain if they would be willing to grant you a leasehold extension on a voluntary basis i.e. outside the statutory provisions.
If you proceed under the LRHUDA 1993 your Landlord is bound to grant a lease extension in all but the most exceptional circumstances. The first step is to serve a Tenant’s Statutory Notice of Claim on the Landlord setting out the proposed price to be paid for the leasehold extension. The Notice would provide for a lease term of 90 years beyond the expiry date of your existing lease and a peppercorn ground rent i.e. nil.
Once the Notice has been served this automatically makes you responsible for payment of the Landlord’s reasonable legal and valuation costs.
The Landlord then has a period of two months in which to serve a Counter-Notice setting out whether or not your claim is admitted and the price at which the Landlord will grant a lease extension. There is then a further two month period in which the price for the leasehold extension can be negotiated. If an agreement cannot be reached between you and the Landlord the matter can be referred to the First-Tier Tribunal for determination.
If the Landlord is prepared to voluntarily grant a lease extension you will probably still be liable for payment of the Landlord’s reasonable legal and valuation costs. The terms of the lease extension may differ from the provisions of the LRHUDA 1993 and may appear to be more favourable, however, you should be wary of increased ground rents and other terms which may be unacceptable to Lenders.
To discuss your leasehold extension further or for conveyancing matters, please contact a member of the Conveyancing team.