Is it time to think about extending your lease?

If you own a leasehold house or flat with less than 90 years left to run, it may be time for you to consider obtaining or approaching your landlord for a lease extension. Without this, it may be or may become more difficult to sell or mortgage your property. 

With leasehold residential properties, as the residual term becomes shorter, they become less appealing to buyers and more unattractive to mortgage lenders. 

There are two ways of extending your lease:

  1. By voluntary agreement with your landlord – your landlord will usually be happy to grant you a lease extension on payment of a suitable price (referred to in this context as a “premium”). This is purely a matter for negotiation but you would be advised to request your landlord produces expert valuation evidence in support of any such premium proposed, and you may also choose to obtain your own valuation advice;
  2. If you have owned your lease for at least two years (you do not need to have lived in the property), you will also be entitled by law to a lease extension pursuant to the Leasehold Reform, Housing and Urban Development Act 1993. The process begins by service of an initial notice on your landlord within which you propose a premium you are prepared to pay for an extension to your lease term. The landlord must respond to this and a set procedure follows. Because the ultimate sum payable by way of premium is dictated by a formula set out in the legislation, it would be advisable to seek expert valuation advice before serving the initial notice, where this figure does need to be realistic. Unsurprisingly, generally speaking the shorter the remaining lease term is, the higher the premium will be.

Usually (and common sense would dictate) it is preferable for parties to agree a lease extension on a voluntary basis, for a reasonable premium. However, where this is not possible, the statutory route outlined above can be used to ensure you obtain the lease extension that you need and to which you are  lawfully entitled pursuant to the leasehold reform legislation.

Are you a long leaseholder? Could you benefit from extending the lease on your property before the term decreases any further? If so, please contact our Commercial team on 0113 201 4900 or commercial.property@emsleys.co.uk.

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