Statutory residential lease extensions – part II – weight on the shoulders of leaseholders

It is often said that the use of leases is outdated and rarely used outside of England and Wales. The acquisition of a leasehold property will invariably cost several hundreds of thousands of pounds, if not millions, for what is essentially an asset that will diminish over time. On this analysis, I can see where the criticism of leases may lie. That being said, protection is afforded for owners of long residential leases of flats pursuant to the Leasehold Reform, Housing and Urban Development Act 1993, which gives qualifying tenants the right to extend their lease in return for a premium. In view of that protection, and the right to enfranchise, my views diverge with those who oppose the use of leasehold interests.

As you may have seen from my part I article on residential lease extensions from a landlord’s perspective, landlords need to be careful when faced with a leaseholder who wishes to extend their lease. This applies just as equally to a leaseholder, but if navigated properly the 1993 Act will give leaseholders an additional 90 years on top of their remaining lease term with a peppercorn ground rent.

The navigational issues that leaseholders face begin at the outset of the lease extension process. Firstly, they have to make sure that their notice of claim is valid, with a realistic premium offered. They then have to serve it on the competent landlord and any third parties to the lease, as well as copying it to other landlords, with the correct addresses being used. Steps must then be taken to make sure that the Notice of Claim is registered against the landlord(s) property at the Land Registry, so as to ensure that it is binding on the sale of the landlord’s interest or the granting of an overriding lease. Delaying to do that, or failing to do that can have dire consequences.

It doesn’t stop however there I’m afraid. Once the landlord has served their Counter-Notice agreeing that the leaseholder has the right to extend their lease, the leaseholder must issue Tribunal proceedings within 6 months (unless the premium and other terms of acquisition are finally agreed), otherwise their claim for a lease extension will be deemed to be withdrawn. If it is withdrawn, the leaseholder will have to wait for a year to elapse from the withdrawal before being able to serve a new notice claiming a lease extension, as well as paying the landlord(s)’s reasonable statutory costs up to the date of withdrawal.

Assuming that the premium and other terms of acquisition are finally agreed, the date of agreement must be accurately recorded, as that date will kick off a process for completion of the lease.   Aside from the timetable fixed for the circulation of a draft lease, the leaseholder will be concerned that the lease is either completed or court proceedings are issued within 4 months from the date of agreement. Why? Well, you probably guessed that failing to do so will mean that the claim for a lease extension will be withdrawn, with the consequences set out above.

It is all worth it in the end however, with statutory lease extensions generally speaking producing better results for leaseholders than an extension entered into voluntarily with a landlord.

How does a leaseholder navigate these issues and take the weight off their shoulders and make the system work for them? The answer to that part is simple, and quite possibly obvious in view of the fact that it is a solicitor writing this article. The answer? Instruct a trusted solicitor who has experience and a proven track record in dealing with lease extensions, as well as a specialist surveyor to advise on the premium and engage in negotiations.