Lease extensions
This section applies only to residential leases. For commercial matters, see renewals of business leases.
If you currently hold the leasehold interest in a residential property, it is important to understand the implications of your ever decreasing term length resulting in it becoming a 'wasted asset'. As the number of years left on a lease decreases, so does it's value, however getting a lease extension may not have to be expensive if you act early. There are two primary factors to consider in regards to residential lease extensions where are addressed below.
Do I have a right to extend my lease?
The right to extend a lease is available to all leaseholders UNLESS:
Your original lease was granted for less than 21 years
You have only had the lease for less than 2 years
You have sublet your lease on a term of 21 years or more
The freeholder is part of a charitable housing trust
The property is within the boundaries of a cathedral precinct
Your property is a National Trust building
Your property is owned by the Crown
In most situations, none of the above will apply in which case you will be entitled to extend your lease.
How much will it cost to extend my lease?
The answer to this question depends mainly on the length of term the lease has left. The key point to consider here is the effect of having less than 80 years left to run on the lease.
I have 80 or more years left to run on my lease - In this case you will only have to pay the Landlords premium (including his/her reasonable legal fees). This can either be agreed by both the Landlord and the Tenant coming to an agreement or otherwise through the Leasehold Valuation Tribunal (LVT). The LVT will take into account many factors into consideration when determining the 'price' which are outlined in further detail down this page.
I have less than 80 years left to run on my lease - In this case the cost of extending your lease will be significantly more than if you have 80 or more years to run. In determining the cost for the lease extension, 'marriage value' now becomes an additional factor; an expensive one at that.
'Marriage value' is explained in more detail in the next section below.
If the 'price' of extending the lease cannot be agreed
As mentioned, in the circumtances that both the Landlord and Tenant cannot agree on the price of the lease extension then the Leasehold Valuation Tribunal will determine it in accordance with general market values and assuming that there is a willing vendor and puchaser. The aim is to compensate the freeholder for the loss of interest in the property. The tribunal will attempt to put a figure on the following:
The value of the freeholders interest
The value of other interests
The marriage value
The proportional split between the freeholder and any intermediate landlords
The amount of any compensation
For how long can I extend my lease?
A period of 90 years is available as per the Leasehold Reform Housing and Urban Development Act, 1993. This is additional to the existing years currently existing on the lease. For this term, no ground rent will be payable.
How can I extend my lease?
Whether you are a freeholder or leaseholder it is strongly advised that you consult a solicitor to deal with lease extensions. The process can vary depending on whether the tenant and landlord can agree on a premium. Also if there are less than 80 years to run on the lease the process can become very compex and it is important that you are able to get the 'right' price for the extension.
Hetts Solicitors have a huge range of experience with dealing with lease extensions, please feel free to contact us using the form on this site or alternatively contact our expert solicitor Michael Connell, as below.
You may also want to consider reading information on: The right to buy the freehold of a property.