EXTENDING YOUR LEASE. HOW IT WORKS.

There are of course plenty of avenues by which you can investigate what exactly is involved when you want, or indeed need, to extend your lease.  This particular one isn’t attempting to provide any definitive answer to the question but hopefully you will find it useful as a ‘belt-and-braces’ guide to this often quite tortuous process.

First things first I shall assume you will have heard rumours of a complete and long-overdue reform of this wretched, ‘feudal’ leasehold system by our governmental overlords.  Things like the removal of ‘marriage value’ for those with leases of 80 years and under and capping onerous, over-engineered ground rents will have oft-times been mentioned.   Well here’s the bad news.  Don’t hold your breath.  They are, not to put too fine a point on it, only rumours.  Long story short the Leasehold and Freehold Reform Act of 2024 which the Tories, for reasons best known to themselves, rushed through parliament in the wash-up to their governmental tenure has yet to be implemented and an ongoing judicial review will almost certainly keep this out of commission for some years to come.  Some suggestions have been between 6-9 years so not much help to you with your problems as of now it must be said.  Not to worry though the new Labour lot are apparently planning to do even better with their proposed Leasehold and Commonhold Reform Bill planned for late 2025.   Whilst the talk is of even more far-reaching reforms than the Tories’ feeble attempt one might be forgiven for asking why the red people would be expecting it to be any more immune than the blue offering to running the judicial review gauntlet.  You get the idea?!

Widespread and deep-rooted reform therefore, if you want my opinion, is not something that any of us is likely to see for some while yet or maybe even at all.  Yes there have been a few tweaks such as allowing buyers of leases to get straight on with a new lease application rather than having to take an assignment of notice or otherwise wait the two years.   Similarly there has been a bit of side legislation if you will in the Leasehold Reform (Ground Rent) Act of 2022 restricting what freeholders can do in respect of any ground rent shenanigans with informal agreements.  All very sensible and helpful of course but, if you will forgive the scepticism of an ageing valuer, these are also-ran matters in the grand scheme of things and frankly not much to show for all the big talk.

So where does that leave us now?  Pretty much where we were before all the talk started would be a fair answer to that question.  Back to the title question then regarding what is involved when you want to extend your lease.  If you have the time and energy I would invite you to browse online.  If you want a thumbnail summary and some sensible, well-intentioned advice then here are a few, headline offerings:

1. You will need a good solicitor and valuer to act for you and cheating on the cheese will likely cost you more money than you may think you are saving.

2. Keep in mind that (unless you already have a share in the freehold interest of the building and why would you be reading this if that was the case?) you don’t own your flat.  All you have is a contractual right (your lease) to use it for a specific period of time in accordance with the terms of that contract so be prepared to manage your expectations.

3. Assume your freeholder is not your friend and any informal agreement that you may be thinking about is unlikely to work out too much in your favour.  The statutory lease extension (it’s actually a new lease) route is undoubtedly flawed but it does still have the advantage of certainty.  That said you should always consider using a valuer (the £ man in these matters rather than the solicitor) to try and broker an informal deal.  It could work.

4. Statutory lease claims nearly always take time and quite a lot of it.  There are exceptions if you are lucky enough to run into a sensible freeholder but 6-9 months is quite common and 12 months is far from unusual.  As you may imagine this does not bode well in terms of professional costs implications but a good, honest team of professionals (solicitor and valuer) working in your best interests will help to keep them in check.  See also 3 above.

5. Having regard to 4 it’s never a good idea to leave things until the last minute and especially if you are looking at a time-critical situation such as a sale.  And NEVER try and sell a short lease.  The estate agent won’t have a clue and my safe prediction is that it will end in tears.  Break glass and speak with your valuer (me?) without delay if you had been thinking about doing this.

6. Your solicitor should explain that (as of now and into the foreseeable it must be said) in addition to your own you will also have to pick up your freeholder’s ‘reasonable’ legal and valuation fees in the exercise.  Sadly there is no specific definition of ‘reasonable’ but your professional team should be able to help.  Knowledge is key and it’s important to budget sensibly to include all heads of cost.

7. A statutory new lease application (a section 42 approach) is a highly tactical affair.  Typically it should kick in with a low offer figure (for a number of reasons which I would be happy to explain were I to be involved) and the expectation should always be for a silly, over-egged counter-offer from your freeholder.  It’s the valuer’s job then (NOT the solicitor’s) to negotiate something sensible and some of them/us are perhaps better than others at doing so.   This is really where it’s all won or lost and keeping all fees in check is nearly always going to be critical.  It’s all money when the dust has settled.

8. Actual tribunal hearings are only involved in a very small number of cases and nowadays, post-COVID, they tend to be rather less expensive, remote affairs in any event.  That’s usually where the dispute has a higher level of subjectivity and involves a lot of money such as is more likely to be the case with shorter lease terms and higher value properties.  Notwithstanding this statistical rarity there will frequently be lots of sabre-rattling and tribunal-talk/threats as part of the negotiation exercise.  If you’re looking for the best deal you may need to show some steel even if you have no sensible wish or intention to use it.

9. You should expect your freeholder to be both experienced and greedy.  You should expect your valuer to know how to best deal with this scenario.

10. Talk to me.