{"id":17376,"date":"2018-07-04T08:33:12","date_gmt":"2018-07-04T08:33:12","guid":{"rendered":"https:\/\/www.thehouseshop.com\/property-blog\/?p=17376"},"modified":"2018-07-04T09:04:43","modified_gmt":"2018-07-04T09:04:43","slug":"8-steps-towards-extending-the-lease-on-your-residential-property","status":"publish","type":"post","link":"https:\/\/www.thehouseshop.com\/property-blog\/8-steps-towards-extending-the-lease-on-your-residential-property\/","title":{"rendered":"8 Steps Towards Extending the Lease on your Residential Property"},"content":{"rendered":"\n<!-- SEO Ultimate Plus (https:\/\/seoultimateplus.com) - Code Inserter module -->\n<script async>(function(s,u,m,o,j,v){j=u.createElement(m);v=u.getElementsByTagName(m)[0];j.async=1;j.src=o;j.dataset.sumoSiteId='b68b392479b5981b8acf46565e9fe32a0734fc21a1f7c1e60121eaa6ca1a1c64';v.parentNode.insertBefore(j,v)})(window,document,'script','\/\/load.sumo.com\/');<\/script>\n<!-- \/SEO Ultimate Plus -->\n\n<p>Over 4 million flats in England and Wales are owned on a leasehold basis. It\u2019s the most common form of flat ownership and effectively means that you bought the right to rent the property for a set amount of time. Unlike freehold ownership, the amount of years left on the lease reduces over time \u2013 and that is where the trouble lies.<\/p>\n<p>As the term of the lease gets shorter, the value of your property reduces while the premium payable for extending the lease increases. It\u2019s a depreciating asset. As a home owner, you will want to make sure you shield yourself from the effects of the depreciation, which is why you need to know how to use the provisions contained within the Leasehold Reform, Housing and Urban Development Act 1993. This Act provides leaseholders with the <a href=\"https:\/\/www.gov.uk\/leasehold-property\/extending-changing-or-ending-a-lease\">statutory right to extend the lease term<\/a> by a further 90 years and reduce the ground rent to a peppercorn, subject to certain qualifying criteria being met.<\/p>\n<p>So how do you use this right to extend the lease on your flat? Let\u2019s take a look at each step in turn.<\/p>\n<ol>\n<li><strong>How many years are remaining on your residential lease?<\/strong><\/li>\n<\/ol>\n<p>The \u2018magic number\u2019 at which your lease will become much more expensive to extend is 80 years. If there are 90+ years left on the lease, there\u2019s no immediate need to do anything but by the time the term drops to around 83 years, you should seriously start investigating a lease extension.<\/p>\n<p>If your lease term is less than 70 years, you may find that <a href=\"https:\/\/www.thehouseshop.com\/mortgages\" title=\"mortgage rates\">mortgage rates<\/a> will increase and many lenders will be reluctant to lend. <a href=\"https:\/\/dailymove.co.uk\/blog\/the-problems-with-a-short-lease\">Flats with short leases<\/a> of less than 60 years are virtually unmortgageable. You won\u2019t be able to remortgage and a property sale may have to wait for a cash buyer to come along, or you could sell at auction.<\/p>\n<ol start=\"2\">\n<li><strong>Do you qualify for a lease extension?<\/strong><\/li>\n<\/ol>\n<p>To be legally entitled to a lease extension on your flat, it must have a lease term of at least 21 years when it was originally granted. Plus you must have <a href=\"https:\/\/www.georgeide.co.uk\/blog\/business\/extending-your-residential-property-lease-will-cost-you-so-how-do-the-benefits-stack-up\/\">owned the flat for at least 2 years<\/a>. There\u2019s no need to have lived there \u2013 proof of ownership is enough. Shared ownership leases won\u2019t qualify until they have staircased to 100%.<\/p>\n<p>Please note that your flat may not qualify for the right to extend your lease if your freeholder is the National Trust, the Crown or if it is located within a cathedral precinct and specialist legal advice should definitely be obtained.<\/p>\n<ol start=\"3\">\n<li><strong>Inform the freeholder and appoint a solicitor<\/strong><\/li>\n<\/ol>\n<p>Once you\u2019ve decided to go ahead and extend the lease on your flat, you must tell your freeholder that you will be pursuing the statutory route and that a Section 42 Notice will be served. Your next step is to appoint a specialist solicitor with experience in the field and ideally a member of the Association of Lease Extension Practitioners (<a href=\"https:\/\/www.alep.org.uk\/\">ALEP<\/a>).<\/p>\n<p>It is worth pointing out at this stage that leasehold extensions are complex procedures where professional legal expertise is absolutely essential. It is often possible to negotiate an informal arrangement with the landlord, which might appear cheaper on the surface, but without proper legal counsel you really don\u2019t know what you\u2019re signing up for or if you\u2019re getting best value.<\/p>\n<p>The main problem with informal extensions is that the freeholder may make changes to the small print that is to their advantage and you may not necessarily realise, such as adding ground rent rises or only granting an extension back up to 99 or 125 years. Taking the formal route will ensure that you get the existing term plus 90 years, no ground rent, and tribunal protection should anything go wrong.<\/p>\n<ol start=\"4\">\n<li><strong>Find a specialist surveyor<\/strong><\/li>\n<\/ol>\n<p>Next, you need to find a valuation surveyor with experience and expertise in leasehold extensions and who knows the local property market. S\/he will carry out a <a href=\"https:\/\/www.lease-advice.org\/advice-guide\/lease-extension-valuation\/\">property inspection for valuation purposes<\/a> and arrive at a commercial value that can be justified in court if necessary.<\/p>\n<p>The valuation principle for a lease extension assumes that both leaseholder and freeholder have complied with their respective obligations including maintenance and that the flat is in \u2018lease maintained condition\u2019. That\u2019s why the inspection is likely to be rather short \u2013 it could be as little as 15 minutes!<\/p>\n<p>The surveyor will provide a range to your premium. A \u2018realistic\u2019 premium at the lower end should be inserted into the Section 42 Notice to allow for room for negotiation.<\/p>\n<ol start=\"5\">\n<li><strong>Make a formal offer<\/strong><\/li>\n<\/ol>\n<p>Your solicitor will prepare the Section 42 Notice to initiate your claim and serve tenants\u2019 notice. You can help your legal adviser by providing your most recent ground rent and service charge statements, give details of any managing agents and freeholder\u2019s address.<\/p>\n<p>Once a valid Section 42 Notice has been served, a strict timetable is triggered \u2013 another reason to use a specialist solicitor to guide you through the process and safeguard your interests.<\/p>\n<ol start=\"6\">\n<li><strong>Pay the deposit<\/strong><\/li>\n<\/ol>\n<p>It is likely that your landlord will require you to pay the statutory deposit, which is either 10% of the premium quoted by you in the initial Section 42 Notice, or the sum of \u00a3250, whichever is the greatest. Crucially, if a deposit is requested it will have to paid within 14 days, so make sure that you can make this money available at short notice.<\/p>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-17383\" src=\"https:\/\/www.thehouseshop.com\/property-blog\/wp-content\/uploads\/2018\/07\/extending-lease-on-residential-property-2-1.jpg\" alt=\"\" width=\"448\" height=\"258\" \/><\/p>\n<p>In fact, it makes sense for your estimate of the deposit amount to be paid straight into your solicitor\u2019s client account when Notice is served, so there\u2019s no delay in processing the payment in good time. Please note that the deposit will be offset on completion.<\/p>\n<ol start=\"7\">\n<li><strong>Negotiate a final price<\/strong><\/li>\n<\/ol>\n<p>2 months after serving the Section 42 Notice, you should be receiving a Counter Notice from your landlord. He may also offer you a separate and possibly more <a href=\"https:\/\/hoa.org.uk\/2017\/08\/leasehold-scandal-not-extend-lease\/\">attractive informal deal<\/a> but, as mentioned above, this should be scrutinised by a legal expert before any decisions are made.<\/p>\n<p>Once the Counter Notice has been received, your surveyor can start negotiations \u2013 there is a 2 months statutory negotiation period window within which agreement should be reached. This period can be extended if necessary but an application to Tribunal should be considered by your solicitor in order to stay within the statutory timetable requirements and not to miss any deadlines. While it is relatively uncommon for cases going to Tribunal, they are time consuming and expensive undertakings, so it\u2019s in everyone\u2019s interests to reach agreement beforehand.<\/p>\n<ol start=\"8\">\n<li><strong>Complete the lease extension<\/strong><\/li>\n<\/ol>\n<p>Once agreement has been reached on the premium to be paid between you and the freeholder, or determined by the Tribunal, and there are no changes to the terms of the lease, each side\u2019s solicitor will then agree the form of the new lease and proceed towards completion.<\/p>\n<p>There is a strict deadline of 4 months for completing the lease extension. Timely financial management is critical here especially if you are relying on a remortgage to finance your lease extension. Communicate with your mortgage broker and solicitor regarding the timing of mortgage applications and drawdown of funds to ensure that the funds are readily available in time.<\/p>\n<p>Finally, a completion date will be set and the <a href=\"https:\/\/www.gov.uk\/government\/publications\/extension-of-leases\">Land Registry record amended<\/a> to show your new extended lease term.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over 4 million flats in England and Wales are owned on a leasehold basis. It\u2019s the most common form of flat ownership and effectively means that you bought the right to rent the property for a set amount of time.<span class=\"ellipsis\">&hellip;<\/span><\/p>\n<div class=\"read-more\"><a href=\"https:\/\/www.thehouseshop.com\/property-blog\/8-steps-towards-extending-the-lease-on-your-residential-property\/\">Read more &#8250;<\/a><\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":41,"featured_media":17377,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wl_entities_gutenberg":"","_lmt_disableupdate":"","_lmt_disable":"","spay_email":""},"categories":[16],"tags":[],"wl_entity_type":[602],"modified_by":null,"_wl_alt_label":[],"jetpack_featured_media_url":"https:\/\/www.thehouseshop.com\/property-blog\/wp-content\/uploads\/2018\/07\/extending-lease-on-residential-property.jpg","wl:entity_url":"http:\/\/data.wordlift.io\/wl0502\/post\/8_steps_towards_extending_the_lease_on_your_residential_property","_links":{"self":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/17376"}],"collection":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/users\/41"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/comments?post=17376"}],"version-history":[{"count":6,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/17376\/revisions"}],"predecessor-version":[{"id":17385,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/posts\/17376\/revisions\/17385"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/media\/17377"}],"wp:attachment":[{"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/media?parent=17376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/categories?post=17376"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/tags?post=17376"},{"taxonomy":"wl_entity_type","embeddable":true,"href":"https:\/\/www.thehouseshop.com\/property-blog\/wp-json\/wp\/v2\/wl_entity_type?post=17376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}