Lease extension can be through informal or statutory route. Under the informal route, a leaseholder may approach their freeholder for an offer to extend the lease. The new lease terms and premium are entirely subject to negotiation with the freeholder, revision of ground rent and at an open pace. However, to avoid these uncertainties, a leaseholder can proceed under a formal route, protected by the Leasehold Reform Housing and Urban Development Act 1993, with specific provisions for a 90-year extension at zero (peppercorn) ground rent from the date of extension. To initiate the formal route, a leaseholder would require a valuation providing potential range of premiums and serve a Section 42 Notice on the Landlord.

To be eligible for a formal lease extension, flat owners must own a long lease (granted for a term of years exceeding 21 years) and either:

  • Have owned the property for a minimum of two years, or
  • Be assigned the benefit of a Tenant’s Notice served by an eligible leaseholder prior to purchase.

The above does not apply if the lease is a business lease and if the landlord is a charitable housing trust with the accommodation provided in pursuit of its charitable purposes.

Yes, the proposed terms and premium are negotiable. However, you may be better off with the formal route of negotiation as prescribed by the Leasehold Reform, Housing and Urban Development Act 1993 (the Act) which offers certainty of term (including addition 90 years in addition to your current unexpired term) and guidance for basis premium calculation. We recommend that you appoint a surveyor to review the proposed terms and advise you on the best way forward based on your circumstances.

A leasehold flat becomes less valuable over time due to reducing term. It therefore makes economic sense to extend your lease as soon possible to protect your interest and value. If extending under the terms of the Leasehold Reform, Housing and Urban Development Act 1993 (the Act), the need to extend your lease becomes critical as the unexpired term approaches 80 years. The premium payable to the freeholder has two distinct parts; (i) reduction in value of the freeholder’s interest and (ii) Marriage Value, applicable where the lease is shorter than 80 years. Marriage Value would usually significantly impact on the amount of premium payable to the landlord to leaseholders are advised to extend their leases before the 80-year milestone is breached.

This is a formal notice, that follows a prescribed form under the Leasehold Reform, Housing and Urban Development Act 1993 (the Act), served by the leaseholder/ tenant on the freeholder/ landlord. Service of the Tenant’s Notice initiates the formal procedure for acquiring a 90-year extension to the lease at peppercorn (zero) ground rent.

You should contact your surveyor or solicitor to prepare and respond with a Counter Notice within the time specified in the Tenant’s Notice. Failure to meet the deadlines could affect your ability to negotiate the premium and terms of the lease extension. The Leasehold Reform, Housing and Urban Development Act 1993 (the Act) provides that the leaseholder/ tenant is responsible for the Landlord’s reasonable cost from the service of the Tenant’s Notice.