By Sarah Khamis Carson, Solicitor

1. What is leasehold property?

When property is part of a building i.e. a flat, it is most likely leasehold, rather than freehold property. If you own leasehold property, this means that you lease the individual flat unit from your landlord, for a set number of years only. This number of years will depend on the lease between you and your landlord. A lease is a contract between you and your landlord and sets down the legal rights and responsibilities of either side, such as maintaining the flat and paying annual ground rent and service charges.

2. Why do I need to renew my lease?

A lease is granted to you by your landlord for possession of the property, for a determinable period of time only. Once the number of years left on your lease expires, the ownership of your flat will revert to your landlord.
If there are 90 years or less remaining on your lease and you wish to sell the flat, a buyer will likely request that you have the lease extended, before the purchase completes. It is often the case that lenders will refuse to lend on short leases!
Whilst we refer to a “lease extension”, this is actually a new lease of the flat on similar terms as the existing lease, but with a new length of term, a new rent and possibly other simple changes.

3. When should I renew my lease?

As a general rule, the shorter the lease gets, the more expensive it will become to extend.

We recommend extending your lease before it falls below 80 years. Once we reach the 80 year mark, the premium payable to your landlord for the lease extension would increase considerably. This is because you, as the tenant, would be called on to pay half of the “marriage value”.

Marriage value is, essentially, the difference between:
(1) the value of the landlord’s and the tenant’s interest under the existing lease; and
(2) the value of the landlord’s and the tenant’s interest under the new lease.

4. Why do I need to pay a premium to my landlord?

The premium can be seen as a form of compensation to the landlord. By the grant of a lease extension, you will benefit from the increase in value to the property. However, your landlord loses out as the extension lengthens the period before ownership of the flat will revert to him.

5. How many years remain on my lease?

Your lease sets out the number of years for which the lease was initially granted. If you do not have a copy of your lease, you can ask your landlord for a copy or, if your property is registered, request a copy online at the Land Registry for a small fee.

6. How can I renew my lease?

There are two routes by which you might extend your lease. A premium is usually payable to the landlord, no matter which route is selected.

Non-Statutory Lease Extension or Voluntary Lease Extension

You would need to approach your landlord and informally agree to extend the lease by a length and on terms that both you and your landlord agree.

It is important to bear in mind that this method is not regulated by the law. This means that your landlord cannot be compelled to complete the lease extension and is free to propose whatever terms he wishes to include in the new lease. These proposed terms may be unreasonable, especially when it comes to ground rent! It is essential to take advice from your solicitor and a professional valuer as unreasonable terms can leave you out of pocket and/or can leave the property unsaleable.

The non-statutory route is usually quicker and cheaper than the statuary route. If you are selling the property, the buyer will likely require the lease extension to be finalised, before the sale completes.

If you own a share of the freehold then it is often the case that the leaseholders will come together and renew their leases at the same time, without payment of the premium.

Statutory Lease Extension

To pursue the statutory route, you must have owned the property for at least two years. There are other criteria which will also need to be checked. The process involves service of a series of notices and counter-notices and is bound by strict time limits. If agreement cannot be reached on the lease terms during the process, the matter might well become the subject of litigation before the First Tier Tribunal.

The new lease will be for a term equal to the number of years remaining on your existing lease, plus 90 years and the rent will be a peppercorn (i.e. notional) rent.

If you are selling the property, it may be possible to assign the right to a statutory lease extension to the buyer who will then be able to complete the lease extension process. This should speed up the sale.

7. Who is my landlord?

Your landlord should be named in the Freehold Title Register, which is downloadable online, at the Land Registry. The name and address of your landlord should also be on any annual ground rent demands that you receive. It may be that there is more than one landlord if, for instance, you have a sub-lease. If, after reasonable efforts, you are unable to locate your landlord, you can apply to the County Court for a Vesting Order. Humphries Kirk would be able to assist you with ascertaining the “competent landlord” or with the Court process if required.

8. How much will it cost to renew my lease?

As the leaseholder, you will be responsible to pay:

• the premium to the landlord (determined by a professional valuer);
• your solicitor’s and your valuer’s fees;
• the landlord’s solicitor’s and valuer’s fees;
• the registration fee to register the lease at the Land Registry; and
• if you have a mortgage on your property, you may also need to cover your lender’s fees for approving the new lease.
• If you would like to contact us for a costs estimate, please do get in touch.

9. How can Humphries Kirk help?

Our specialist team of leasehold experts, Katharine Jones and Sarah Khamis Carson are more than happy to assist you with your lease extension and any queries that you might have. Please do contact our leasehold team at kjones@hklaw.uk and s.khamiscarson@hklaw.uk or on 01305252570 or 01202 437159 with any enquiries.