Extending your residential lease

There are two options available to tenants who want to extend the term of their existing lease.

Informal Procedure:

Your Landlord may be willing to negotiate an informal extension of your lease. There are no restrictions on the terms which can be agreed.

Your Landlord may ask for a fee from you before they will instruct a valuer and propose terms. Once your Landlord has proposed terms we strongly advise you to seek your own expert advice on whether those terms are reasonable. In particular, Landlord's may impose a rising ground rent  in the new lease which could have an adverse impact on the value of your leasehold interest towards the end of the new lease term.

If terms can be agreed we will liaise with your Landlord's solicitors to document the terms of the lease extension.

In addition to our costs you will also be liable to pay for the Landlord's solicitors costs and their valuer's fees, plus reasonable disbursements.

Depending on the premium agreed for the lease extension and your particular circumstances, Stamp Duty Land Tax may be payable on the new lease.

If for any reason it is not possible to negotiate an extension of your lease informally, the statutory procedure will have to be invoked if you wish to proceed (we would need to refer you to our property litigation department in this instance).

Statutory Lease Extension:

This right is available to qualifying Tenants who have a long lease and have owned the property for more than two years.

Your Landlord will still require a premium to extend the lease, but the statutory requirements are that the term of your existing lease must be extended by an additional 90 years to the unexpired term of your existing lease. Landlords can only charge a peppercorn rent (i.e. nothing) for the remainder of the extended term and can only propose 'reasonable' minor modifications to the terms of your existing lease.

The cost of obtaining a statutory lease tends to be more than for an agreed lease extension, as more work is required by the Landlord and Tenant’s solicitors and their valuers. However it is usually possible to achieve an extended leasehold interest which is more appealing to prospective tenants (i.e. potential purchasers should you wish to sell the property in future).  If the parties cannot agree the new terms of the lease the matters would be referred to the Leasehold Valuation Tribunal. 

In  brief, the statutory Lease extension procedure is as follows:

The first stage of a statutory Lease Extension is instructing a valuer. The valuer will carry out a survey of your property and provide an estimate of how much they think you should pay to the Landlord in exchange for an extension of your lease.

The next stage of the statutory Lease Extension is to serve a notice on the Landlord proposing the figure which you are willing to pay for the lease extension. The Landlord then has to serve a counter notice by the date shown on the notice served on him, which cannot be less than two months. The Landlord can either admit or deny your right to a lease extension and either agree with the figure you have suggested, or make a counter offer. Your valuer can negotiate on your behalf to agree the final premium payable by you to the Landlord. If the premium cannot be agreed it will be fixed by a Tribunal.

Once the lease has been approved it will need to be signed by all of the parties and completed within two months of all of the terms being agreed, otherwise it will be necessary to make an application to the County Court to secure your right to a new lease.

Depending on the premium agreed for the Lease Extension and your particular circumstances, Stamp Duty Land Tax may be payable on the new lease.

Please note that under the statutory process, as the leaseholder, once your initial notice is served you will have to pay the Landlord's costs of preparing the lease and their valuer's costs of assessing the premium in the matter (whether or not the matter completes), as well as your own. You must therefore ensure you have finances in place to cover the costs of the premium and the other associated costs before you embark on this process.

Key Contact

Judith Park

Partner

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+44 (0)1392 333707


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