Expert View: What should you do if you need to extend your lease?

PUBLISHED: 10:11 20 September 2017

Craig Rennie, HRJ Foreman Laws

Craig Rennie, HRJ Foreman Laws


Craig Rennie from the Residential Property department at HRJ Foreman Laws Solicitors in Hitchin and Welwyn Garden City answers some frequently asked questions about residential extensions.

Why should I extend my lease?

If you are selling a property with an unexpired lease term of less than 80 years a potential buyer is likely to insist that you extend the lease on or before completion. When a lease has an unexpired term of less than 80 years the cost of extending it increases as the term decreases. This is because the landlord is entitled to additional ‘marriage value’ when determining the premium.

Many lenders will also be reluctant to lend on a flat with a short lease and a future buyer must own the property for at least two years to be eligible to serve a statutory notice to extend the lease.

What is the difference between a non-statutory and statutory procedure?

* Statutory Procedure

If you have owned the property for two years then you are entitled to serve a statutory notice on the landlord for an extension of your existing lease. When the landlord receives your notice, they have two months to serve you a counter notice - here they will state if they accept or reject your terms. If you don’t receive any reply within the two month deadline, you are entitled to a lease extension on the terms set out in your original notice.

If the landlord serves a counter notice, your valuers have a period of two months to negotiate and agree the premium for the new lease. If an agreement cannot be reached, you have six months from the date of the landlord’s counter notice, to apply to the Property Chamber First Tier Tribunal to determine the premium and the terms of the new lease.

If you extend the lease under statute you will be entitled to a new lease that extends the term by 90 years. This will be added to any time remaining on your current term. The new ground rent will be a peppercorn rent from the date of completion.

* Non-Statutory Procedure

The non-statutory procedure means that you deal directly with the landlord and all terms of the new lease are subject to negotiation. The advantages include reduced cost and time for both parties. It also allows you to negotiate a short lease extension enabling a sale or re-mortgage to proceed at the same time.

The disadvantage is that all terms are subject to negotiation so a landlord could include some unfavourable terms such as unfair ground rent review provisions and increasing the existing notice fees and interest rates payable under the existing lease.

If you receive an offer of a non-statutory lease extension from a landlord you should always consult a specialist valuer and ask if the proposed terms are reasonable and also take independent legal advice.

What other costs do I need to consider?

You will need to instruct a specialist valuer at the outset. They will give you an overview of the likely costs and the final figure for the premium, which you should insert into your statutory notice. In addition you will be responsible for the landlord’s reasonable legal and valuation fees together with your own legal and valuer’s fees.

For advice, contact:

Tel: 01462 458711

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