Do you own a leasehold property and you’re looking to extend your lease? Are you concerned about your rights? Perhaps you have a difficult landlord and you’re worried they’ll refuse your lease extension? In this blog, we are going to look into whether a freeholder can refuse your lease extension request.
If you’re unsure about how leasehold extensions work and find yourself Googling “extending my lease” to find out more information, why not take a read of our blogs What is a Lease Extension? and How Much Does it Cost to Extend a Leasehold? Alternatively, give us a call and we can help to demystify the subject for you. Leasehold extension is a difficult and complex process and is best handled by professionals. Here at Taylor Chartered Surveyor, we provide lease extensions in London and lease extensions in Essex and the surrounding regions. Contact us to discuss how we can assist you.
Why do I need to extend my lease?
If you own a leasehold property then you should be aware that the value of it is affected by the number of years left on the lease. The shorter the lease time, the lower the value of the property. The reason for this is that the cost of extending a lease dramatically increases if the lease falls below 80 years. This is when you have to pay an additional fee on top of the premium you pay the landlord, called a marriage value. It gets more expensive as the number of years left goes down. If you let the lease run out altogether, ownership of the property then returns to the landlord!
Does the freeholder legally have to grant you a lease extension?
This depends on how long you’ve held the lease. If it has been less than 2 years, the freeholder can refuse to extend the lease. However, it isn’t a solid no. In some cases, a landlord may be willing to extend the lease for a tenant who has been in the property for less than 2 years. This can be done informally but the terms of the extension and number of extension years can vary. The Freeholder can also withdraw from this process at any point.
An informal lease extension is where you contact the landlord to try to negotiate a lease extension without any legal backing. The landlord can still refuse and they can ask for any price they like. It’s not all doom and gloom though. It can be possible to have a successful informal lease extension and it is cheaper in terms of having to pay no legal or surveyor costs. (Note that you have to pay the landlord’s legal costs too when carrying out a formal lease extension.) It is a lot quicker going down the informal route too.
Oftentimes though, with an informal lease extension, you will not get a good deal. The freeholder could pile on higher ground rent, introduce other charges or add unfavourable changes to the lease. A formal or statutory lease extension allows you to add more years to your lease, takes your ground rent to zero, retains the same lease terms and puts you in control. Remember though, that you can only opt for a formal lease extension if you’ve owned the property for over the 2-year mark.
What if I have owned the lease for more than 2 years?
If you’ve owned the lease for over 2 years then you are entitled to a statutory lease extension. The Leasehold Reform Housing & Urban Development Act 1993 gives leaseholders the right to extend their lease by 90 years. You have to pay the freeholder a premium to do this. The cost of the premium is based on a formula (Find out more here.)
Your freeholder should be willing to agree to the extension. If they try to refuse or don’t respond to your request, your solicitor can serve a Tenant’s Notice. This will force them into formal proceedings.
Your landlord will have minimal grounds for refusing a lease. The only exception may be if they can prove they are planning to develop the site and the extension would interfere with this. Worry not, you are almost guaranteed to have your lease extension granted thanks to the 1993 Act.
Am I a qualifying tenant for a lease extension?
The key conditions you need to meet to qualify for the right to extend a lease in the UK are:
- As discussed, you must have held the lease for at least 2 years.
- The lease must have originally been at least 21 years long.
- The freeholder is not the Crown, National Trust or part of a building within a cathedral precinct.
Can there be complications in the lease extension process?
The landlord will want to get the highest premium possible. They’re going to be losing out on ground rent after all. They may dispute the premium that you offer. If you can’t come to an agreement then this can lead to a First Tier Tribunal. Your legal costs will then increase a lot.
The landlord would have to pay their own legal costs for the Tribunal so it’s not something they’re going to want to happen either. Up to this point, you’d have to pay their legal fees. Unless the premium you offer and the premium that they want is dramatically different, then going to a Tribunal isn’t going to be worth the cost to the landlord. Otherwise, they’re just going to end up paying legal costs for nothing. It is in the interests of both parties to come to an agreement rather than going to Tribunal.
A further complication is that if you fail to come to an agreement or you have not applied to the Tribunal within 6 months since the counter-notice, then you have to wait 12 months before you can start the process again. You’ll also have to wait 12 months to reapply if the court agrees that you have submitted a premium figure which is unreasonable. That’s why it’s essential that you get sound advice from a professional when coming up with your premium offer. Waiting another year is frustrating as this means another year is lost from your lease.
You may be put off extending your lease if you have a problematic landlord. It doesn’t need to be a daunting process though; Taylor can handle your lease extension for you. No matter how difficult the freeholder may be, it is usually possible to reach an agreement. Lease extension is a difficult process. We recommend that you get the professional help of a solicitor with experience in this area. Stop Googling ‘extending my lease’ and come straight to Taylor Chartered Surveyor. We can assist with lease extensions in London and lease extensions in Essex and the nearby regions. Contact us to find out how we can help you.