Freeholders and lease extension – fulfilling your obligations whilst safeguarding your rights

Many leasehold properties were built in the housing booms of the last century, meaning that their leases are fast approaching the point where there is less than 80 years left to run. It’s at this point that these properties become more difficult to sell, and consequently freeholders can expect to receive enquiries from leaseholders about lease extension.
 

Dealing with an extension request

It is of course possible for a lease to be extended on an informal basis, by direct negotiation between the freeholder and leaseholder. However, it’s often the case that the freeholder is unaware of the leaseholder’s intention to request an extension until they receive a section 42 notice issued under the terms of The Leasehold Reform, Housing and Urban Development Act, 1993.

It’s at this point that we can offer the advice needed to ensure that the procedures set out under the act are strictly followed. In order to be valid, the notice needs to contain the following information:

• The full name of the leaseholder and the address of the property, with sufficient information to correctly identify it
• Full details of the lease, including the date of commencement, and its terms
• The premium proposed for the new lease
• The terms that the leaseholder proposes for the new lease (if these differ from the current lease)
• The name and address of the leaseholder’s appointed representative, if they have one
• A date by which the freeholder must serve their counter notice, which must be not less than two months from the date on which notice is served.

If any of the information above is missing or incorrect, then the notice can be deemed invalid and set aside. If the notice is valid, your solicitor is entitled to request evidence of the leaseholder’s title and their period of ownership, and will need to do so within 21 days of the date of service of the notice. The leaseholder will have the same 21 days to provide any information you require, and will usually do so via their solicitor.
 

Deposits, valuations and counter notices

Once you receive the leaseholder’s notice to extend, you have the right to request a deposit from them, equivalent to 10% of the premium stipulated in the notice or £250, whichever is greater.

You’ll need to enlist the services of a suitably-experienced surveyor to carry out an independent valuation. Their figure is added to the counter notice and sent to the leaseholder or their solicitor.

All the stages in a lease extension are time-sensitive, and the counter notice is no exception. As well as being served by the date specified in the leaseholder’s notice, it must:

• acknowledge the leaseholder’s right to a new lease and accept their terms (or propose alternative terms), or
• not admit their right and give reasons, or
• claim a right of redevelopment.

Failure to serve a counter notice within the correct time period will give the leaseholder the right to apply to court for a new lease, so it is essential to respond promptly.
 

Negotiating the price

If the premium cannot be agreed following the service of the counter notice, then both parties enter into negotiations via their respective surveyors, for a period of between two and six months. Either side can apply to the Leasehold Valuation Tribunal during this period if they can’t agree a figure.
 

You are entitled to reasonable costs

It’s important to be aware that the leaseholder is responsible for your reasonable costs from the date of the initial notice. This includes your solicitor’s fees for any time spent on receiving and serving notices, any necessary investigative work, all other correspondence between the relevant parties, and any involvement from your surveyor. Once negotiations commence, each side pays their own expenses.

When the premium is finally agreed between the two surveyors, a new lease must be entered into within a further two-month period. If you do not meet this requirement, the leaseholder has a further two months in which to apply to the court and enforce their rights.
 
Here  to help

Extending a lease is a complex process, so getting professional advice is essential. We can advise you on your rights, assist with the legal formalities, and introduce you to experienced surveyors who can help you get a fair price for a lease extension. So, if you’d like to know more, contact Salvatore Amico on 0203 871 0039 or via email