Is your property a ticking time bomb?

Tuesday 25 March 2014

Many leaseholders have a right of renewal over their leasehold title for a term equal to the unexpired residue of the existing lease plus 90 years.

Do you have the right to make an application for a lease extension?

You must be able to satisfy the following:

• The lease must be a long lease exceeding 21 years.
• The landlord must not be a charitable housing trust providing the property is offered to the tenant for the purposes of its charitable functions.
• The lease must not be a business tenancy.
• You must have owned the leasehold title for at least two years.

Making an application for a lease extension

In order for a leaseholder to make an application to extend their lease they must firstly send the landlord the correct notice. This notice sets out the following:

• The parties to the lease;
• The term;
• The proposed extension to the term;
• The address of the property;
• A notice period for a reply from the landlord; and most importantly
• The proposed premium.

The costs of the lease extension

An easy way to estimate the cost of your lease extension is to use the calculator provided by the Leasehold Advisory Service. However, a formal valuation is always advisable should there be any dispute with the landlord during this process.

The longer the unexpired residue of the existing lease, the cheaper the premium will be. It is vital that any application for a lease extension is made before the unexpired residue of the existing lease drops below 80 years, otherwise the premium payable increases rapidly.

What’s next?

Providing the notice served is valid the landlord will be required to give a formal response to the tenant within two months of the notice.

If the landlord admits the claim he can either accept the proposed figure in the tenant’s notice of claim or make a counter offer for a larger sum. At this stage the tenant can agree with the landlords court offer or the tenant’s valuer and the landlord’s valuer will meet and agree a premium figure.

Nevertheless, if the landlord’s counter notice refuses to grant the claim then the refusal must be referred to court. The application to court must be made within the notice period.

The court will do one of the following:

• Support the landlord’s assertion that the tenant did not have the right to serve the notice;
• Confirm that the tenant did have the right to serve the notice and Order for the landlord to serve the correct counter notice; or
• Confirm that the landlords notice is consistent with the criteria for development and therefore deem the landlord’s counter notice as valid. If this Order is made the tenant will not be granted an extension to their lease.

Here at Blacks we have a wealth of experience in dealing with all types of property issues, including lease extensions. Should you require any type of property law advice please do not hesitate to contact us on 0113 207 0000.