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How to Extend Leasehold

In order to be eligible to extend your lease, you will have to have owned the property for a minimum of two years.

Once you are eligible, you will need to complete the following steps to successfully extend your lease.


Leasehold Extension Process:


Valuation of the Property

This will give you a full understanding of the cost to extend your lease, it will also set out the likely low, middle and upper-cost ranges of the process thereby ensuring you are fully informed before you proceed.

Your Surveyor should visit, get a full understanding of its layout and floor areas while also taking account any improvements you have made to the property that would increase its value beyond ‘lease maintained condition’.

The Act ensures that you do not end up paying the increased value of any of the improvements, therefore giving your surveyor a full list of these could save you a considerable amount of money.

Once you have the valuation in hand, you have established that you are in a position to proceed you can then proceed onto the next step.


Instruct a Solicitor

Once you have the valuation in hand and you have decided to proceed the next step will be to instruct a solicitor to serve the Section 42 Notice.

This Notice not only informs the landlord that you intend to extend the lease, but it also puts forward your offer for the premium. You will be able to confirm this amount from your Surveyor’s valuation.

Valid Notice Service is key, invalid Service can see the tenant having to wait a further 2 years before they can reserve.


Notice Service

Once the Notice is served you can do little more than await your freeholder’s response.

Under the Act the timing the Tenant can set on the Landlord’s response must be not less than two months from the date on which the Tenant's Notice was served.

The Notice is one of the most important parts of the process. Not only is it your offer to the landlord, but it also stops the clock on the valuation.

This means that the date of the Notice becomes the date of the valuation, therefore if the market has a dramatic value increase in the months following the Notice service, you won’t be prejudiced by this


Landlord Response

If your landlord has responded it means that you will be receipt of a landlord's counter-notice formerly known as Section 45 Notice.
This notice will confirm the landlord’s counteroffer for the lease extension and will essentially set the upper end of the negotiations.
It is common for counter-notice figures to be high, once you have it to hand it is advisable to talk to your Surveyor as he will be able to give you his professional opinion on it.

Under the Act, the landlord has the right to request 10% of the premium offered in the tenant’s Section 42 Notice.


Tenant and Landlord Negotiations

Now that you have the counter Notice in hand, the next step is for your Surveyor and the landlord’s Surveyor to enter into negotiations.
These negotiations will cover everything from the valuation of the property on its current lease, to the valuation of the flat on a long lease, to the relativity and the reversion.
Once all these valuation points have been agreed there will be a final figure that both Surveyors have agreed is reasonable.

This figure will then need to be paid to the landlord for the leasehold extension (less any deposit).

What happens if the landlord doesn’t respond to my Notice?

If the landlord has not responded you should seek advice from your solicitor, however, in short, you will have to proceed to the LVT for determination of the premium.

What happens if Negotiations Fail

Although the respective surveyors are tasked with reaching an agreed figure for the leasehold extension, in some cases this isn’t possible.

Such situations tend to arise on high-value properties, properties with substantially short leases or where one of the parties is more towards the difficult end of the spectrum.

If you find yourself in this situation you only have 1 option and that is to proceed to the Leasehold Valuation Tribunal (LVT).

The LVT is a formal tribunal whereby a panel of experts will hear the arguments from both the landlord and the tenant. The experts will then make a formal decision on the leasehold extension premium based on the information that has been presented to them.

The LVT panel will consist of a person with a law background, usually a solicitor, a person with a property valuation background, usually a surveyor and then finally a layperson.

Proceeding to LVT is not to be taken lightly and generally, your surveyor should do all they can to avoid it. However, if you find yourself in the situation whereby you are proceeding to LVT, you should seek advice from your solicitor at the first instance to ensure that you have taken account of all statutory timeframes and have a full understanding of the cost implications.