Why should I extend the lease over my house?
The statutory provisions allow a tenant of a leasehold house to extend their lease by 50 years for no premium. The ground rent is usually increased to a ‘modern ground rent’ after the expiry of the original lease term which is likely to be considerably more than the ground rent that you are currently paying under the existing lease. This will also make any future claim to acquire the freehold more expensive. The only reason that extending the lease on your house, rather than acquiring the freehold, would be beneficial is if you do not have the funds to buy the freehold but you do not want to give up possession of the house to the landlord.
If you have the funds to do so, it is highly recommended that you buy the freehold to your house rather than extend the lease as most houses in England and Wales are held under freehold title, rather than leasehold title. This is because, generally there is no good reason for a house to be held under a leasehold title as there are no internal or structural parts of a house that are used in common with other houses which require the regulation of having a lease.
If you hold the freehold title to your house, then you will own your house in perpetuity rather than for the time period granted by the lease, and you will have complete control over the management of the house with no restrictions imposed by a third party landlord.
In addition, a house with freehold title is much more marketable than a house with leasehold title and it will therefore be much easier to sell. It can also be trickier to sell or to obtain mortgage finance over a leasehold house, especially if the house has a short lease.
What is the cost of extending the lease over my house?
The total cost of the claim to extend the lease over your house will be comprised of the following:-
- Your costs – this will include the cost of your solicitor and your valuer (if any), plus any disbursements, for example, Land Registry fees, Tribunal fees, bank charges, etc.
- Your landlord’s reasonable costs – this will include the reasonable costs of the landlord’s solicitor and valuer (if any), plus any of the landlord’s disbursements in connection with the lease extension procedure. It is important to note that you are not responsible for any of the landlord’s costs in connection with negotiations. If the matter ends up being determined by the Tribunal then you will not be responsible for the landlord’s costs in connection with any preparation or attendance at the Tribunal hearing.
In addition, you will pay an increased ground rent after the expiry of the original lease term. The modern ground rent is calculated by reference to the letting value of the land without a house. It is expected the modern ground rent will be considerably more than the ground rent you are currently paying under the existing lease.
How long will it take to extend the lease?
We usually estimate that the procedure will take 6-12 months from the service of the initial notice to completion of the claim, however, there are no statutory time limits for progressing the claim, so please do be prepared for it to take considerably longer.
How does my house qualify to make a claim to extend the lease?
To qualify for a claim to extend the lease over your house:-
- the claim must be made in respect of a building which is reasonably considered a house and divided vertically from any adjoining house; and
- the lease must be a long lease which was originally granted for a term of 21 years or more; and
- you must have owned the property for at least two years before you serve the initial notice (but you do not necessarily have to have lived in the property for the last two years); and
- you must meet the low rent test and the property must have a rateable value below a prescribed limit.
What is the procedure for a claim to extend the lease of my house?
The lease extension procedure is commenced when the tenant serves a formal notice on the landlord (in the prescribed form).
The landlord may then serve a notice in reply which must be served within two months of the date of the tenant’s notice. This notice should state whether the landlord admits the claim and if they do not admit the claim they must provide their reason why they do not admit the claim. If the landlord does not admit the claim, then the tenant must apply to the court for the court to determine whether they qualify to extend their lease.
Provided that the landlord admits the claim, the parties’ representatives will enter negotiations with a view to agreeing the terms of the new lease including the revised ground rent. If the terms cannot be agreed then the parties can apply to the Tribunal to determine the terms.
In accordance with the regulations, completion should take place at least four weeks after the premium is agreed and either party can serve a completion notice on the other setting a completion date on the first working day four weeks after giving the notice.
Following completion of the lease extension, we will deal with all the post-completion formalities, including registering the lease at HM Land Registry.
How can LEASE Law help me with my claim to extend the lease over my house?
LEASE Law are specialist solicitors who can act on your behalf in respect of the legal requirements for extending the lease over your house. In the vast majority of cases, we are able to offer a fixed fee for acting on your behalf.
The work that we will carry out for you includes investigating the title to your property, preparing and serving the initial notice on the landlord, receiving any notice of reply from the landlord, negotiating the terms of the lease, completing the lease and registering the lease at HM Land Registry. We will also liaise with your valuer in respect of the new rent if this is necessary.
We can also recommend specialist enfranchisement valuers who have extensive experience and expertise in this area to advise you on the new ground rent that you can expect to pay.