Leasehold Extension Solicitors

Contact our Conveyancing Team: 0115 924 7028

Our fees and disbursements for Leasehold Extension

We have the following fees for a Leasehold Extension so long as the payment for the extension is no more than £10,000

Our costs including VAT – £504

Land Registry Fee – £40

Official Copies – £18

Bankruptcy Search per person buying the property – £2.40

Land Registry Search – £3.60

Identification Search per person – £4.50

If an interbank transfer required to transfer monies to the landlord then a charge of £37.00 apply

All the above figures include VAT where applicable.

If the payment is over £20,000 please contact jwhitmore@campions.co.uk

We have extensive experience in dealing with Leasehold Extensions.

For any questions in relation to this please contact jwhitmore@campions.co.uk

Fees for Issuing and Serving Section 42 Notice(Lease Extension)

Our Fees For Issuing and Serving a Section 42 Notice are £300 inc VAT.

This Notice is needed if you are going down the Statutory Route to extend your Lease. That will be required in cases where you wish to extend your Lease and you cannot reach agreement with the Freeholder. An agreement though is always better if you can manage it on reasonable terms.

Fee for administering matter between issue of section 42 notice and receipt of section 45 counter notice.

The fee for this is £240 Inc VAT.

This will cover any correspondence with the other party during this period. It will also cover any payments that may need to be made to the freeholder, for instance a deposit that maybe required after service of a section 42 Notice.

Our fees for this part are payable in advance.

Fee for serving notice at Land Registry

Our Fee for this is £48 inc Vat and £20 Registration Fee

To safeguard your position on the section 42 notice we can register a notice at the Land Registry. This means that any buyer of the freehold will take subject to the section 42 notice.

The question of Valuation for a Lease Extension

There are four situations which may arise.

The first is where no payment (or premium) for the Lease is required. Generally that will be where the Flat/ Apartment owners also have a share of the Freehold. Naturally in those circumstances they will not want to charge themselves a premium though the flat owners may have to pay legal costs.

The second is where the Freeholder makes an offer and that offer is accepted by the Flat Owner. That may be when the offer is quite low.

The third possibility is to obtain a valuation on line. However you are warned that such valuations can be inaccurate.

The final option is to obtain a professional valuation. Campions Solicitors do not carry out valuations.

We do recommend the following site which gives details of surveyors Local www.localsurveyorsdirect.co.uk. We would strongly recommend obtaining a professional valuation if you are serving a s42 Notice. Valuations given on s42 Notices have to be accurate and near the correct value for the extension. If they are not then the Notice may be invalid.

Warning on Ground Rents and Lease Extensions.

High Ground Rents and/or unreasonable increase clauses can make Leasehold interests difficult to sell. You should aim that the Leasehold Ground Rent becomes a peppercorn. Indeed if you go down the Statutory route that will be imposed. Freeholders may in negotiation ask for unreasonable Ground Rent terms. Be very careful as to what you accept.

What is a Leasehold Extension?

If you own a residential leasehold property then at some point you may need to consider extending the term of the lease .

The question is when should you consider extending the lease.

There are some important dates which need to born in mind. One date is the 80 year date from the end of the term. After 80 years generally it becomes more expensive to extend the lease. The second important date is how long the lease lenders may require. Generally lenders will require a lease which is the length of the mortgage and 35 years.

Taking those factors into account many owners will be considering an extension once the lease goes below the term of 100 years.

Lenders may insist of a minimum of 85 year term in respect to shared ownership leases.

There are two ways in which a lease can be extended. The most common method is mutual agreement between a landlord and tenant. However if terms cannot be agreed then the tenant has a statuary right to apply to the tribunal or issue court proceedings to determine the terms.  

If you have a shared ownership lease then statutory rights do not apply but the housing association will grant a tenant the same rights as if they have a statutory right.

Section 42 Notice

To extend the Lease using the Statutory Route, in other words not by consent, it will be necessary to serve as 42 Notice. This is a Notice that is drawn up under Section 42 of the Leasehold Reform Housing and Urban Development Act 1993.

The section is attached here  https://www.campionssolicitors.co.uk/wp-content/uploads/2019/08/SECTION-42-NOTICE.pdf

The draft Notice is attached here https://www.campionssolicitors.co.uk/wp-content/uploads/2019/08/SECTION-42-NOTICE-MOCK.pdf

The Notice has to be drafted accurately. The Notice should be drafted to request an additional 90 years to the existing term. So if you have a term of 80 years left you should set out an additional 90 years. You must be very careful as to the dates you put on for the extended period. The Landord is entitled to a Premium. An amount  must be put in the Notice. That should be a realistic figure to be obtained by a Valuation.If it is not then the Notice will be invalid.

The rent  to be requested is a peppercorn Rent. There is huge concern about ground rents on Leasehold properties. It is always best therefore to eliminate the ground rent and resist attempts by the Landlord to keep ground rent.

Generally there should be no other variations to the Lease. If you download and use this Notice it is done at your own risk.  ANY MISTAKES CAN MAKE THE NOTICE INVALID.CAMPIONS SOLICITORS WILL NOT ACCEPT ANY LIABILITY IF YOU DO NOT DRAW THE NOTICE CORRECTLY.

Valuation of Premium

If you are a Tenant applying to extend the Lease then you are going to have consider the amount of the premium that you have to pay. That will be the case whether you are proceeding by consent or you are serving a s42 Notice. In either case you may attempt to assess the correct amount to pay yourself or you may appoint a Valuer.

In any event Valuation is an art not an exact science. The legal basis for the valuation is the Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993.  That Schedule is attached here…. The Schedule states that the payment is based on three elements. The first is how far the value of the Landlords interest in the flat is diminished by the extension. That provision is set out under paragraph 3 of the Part II of the Act.

The second part of the compensation is referred to as marriage value. The definition is set out in paragraph 4 of Part 11 of the same Act. The basis of the calculation is detailed and we will not go into that detail. However this will add to the premium. It is important to note that this provision only applies on any unexpired  Lease term of less than 80 years. IF YOU ARE EXTENDING YOUR LEASE YOU SHOULD AIM TO DO THIS BEFORE IT REDUCES TO BELOW 80 YEARS

The third element of the Landlords Premium is set out in paragraph 5 of Part II of the Act. That is set out as “Compensation for loss arising out of grant of new Lease.” Again we will not go through the detail. A Valuer should give a higher and lower figure as a value. Any one wishing to extend their Lease must be flexible in their approach to Value.

Why extend a lease?

A leasehold is known as a ‘wasting asset’ because its value decreases with time. For instance, a lease with over 100 years remaining will be more attractive to buyers than a lease which is coming to an end.

In addition, a lease with less than 80 years remaining has additional costs due to the “marriage value”.

The marriage value is the difference between what the freehold could be sold for if there were no lease, and what it can actually be sold for while encumbered by the lease. When the remaining term of a lease is less than 80 years the tenant becomes liable to pay half of the marriage value in addition to the existing rent.

As a result, a lease with a term of around 80 years or less is far harder to sell than a lease with a longer remaining term. The value of the leasehold may be significantly reduced and the shorter the lease the lower the value.

Extending the term of a lease can therefore protect and even enhance the value of your asset.

How do you extend a lease?

There are two ways to extend a lease, by voluntary agreement between the landlord and the tenant or by taking the matter to the tribunal in the event of a dispute as the terms.

It is always better if you can extend by agreement.

Voluntary extension of the lease can be done at any time and on any lease by mutual agreement between the landlord and the tenant. Extending the lease in this manner can save time and legal costs if the landlord is willing to come to an agreement without a dispute. For this reason voluntary extension should always be considered before pursuing statutory extension.

The landlord is legally bound to comply with a request to a statutory extension provided that the tenant is a qualifying tenant with a qualifying lease. If the tenant and the property satisfy the qualifying conditions then they have a right to extend the lease for a further 150 years if the property is a house or 90 years for a flat. The County Court can arbitrate on disputes over the tenant’s right to an extension and a Tribunal can arbitrate over disputes regarding the price of that extension.

What is a qualifying lease?

In order to qualify for statutory extension you must have owed the lease for at least 2 years and the lease must have originally been granted for a term of more than 21 years – or else contain a clause providing for perpetual renewal.

If you are buying a property and wish to extend the lease, you can request that the seller serves notice upon the landlord before selling. This will allow you to extend the lease without having to own the leasehold for 2 years beforehand.

If you are extending the lease on a flat then the lease will not qualify if the landlord is a charitable housing trust or if the lease was granted for business purposes, such as offices.

What is the Lease Extension Process?

To begin this process you should first consult a solicitor who will check that you are eligible for a lease extension and obtain a valuation of the property. Your solicitor will then serve notice upon the landlord. This notice will make clear your intention to extend the lease and propose a price to be paid as the premium – as established by the valuation.

After the notice has been served the landlord has 2 months to respond with a counter notice. Once the landlord has given their counter notice there is a 2 month period for negotiating the price. After this period the extension should be granted unless no agreement is reached, in which case a price will be determined by a Tribunal.

How much will a Lease Extension Cost?

For the extended term of the lease (i.e. the time after the original lease was due to expire) no rent shall be due – this is referred to as peppercorn rent.

There will however, be a premium payable for granting of the extension. This premium will either be agreed between the parties during the negotiation period or determined by a Tribunal.

YOU ARE WARNED THAT YOU MAY WELL INCUR THE FOLLOWING EXPENSES AS SOON AS A SECTION 42 IS SERVED

– The Freeholder can demand a deposit of £250 or 10% of the figure put on the section 42 notice to extend whichever is higher.
– The Landlords reasonable costs and expenses in dealing with the Notice.
– These may well be up to £2500 and we shall be asked to give an Undertaking. Before that we shall ask you to deposit those fees with us.
Although we have said up to £2500 the eventual fees could be higher than that figure.

Terms of an Extended Lease

If the lease is extended by voluntary agreement then any new terms which the parties wish to include can be incorporated.

If the lease is extended by statutory extension then the terms of the lease can be modified only to take account of alterations to the property. Any perpetual renewal clause will be excluded and a clause prohibiting the tenant from granting a sub-lease will be included.

Service and accuracy of s42 Notice

It is important that the s42 Notice is drawn correctly. It is also important that it is served correctly. If a mistake is made with regard to either then you may not be allowed to amend or reserve and that means that you will have to wait 12 months before reserving the Notice. That could well add to the premium that you eventually have to pay. The notice itself must be totally accurate in all respects. It has to allow 2 months for the Service of  the s45 Counter Notice by the Freeholder. In practice we suggest 2 months and 7 days. It must be served on the Freeholder. You should serve by 1st class post. It is best to serve by Royal Mail recorded delivery so that you have evidence of service.

Our costs between service of the s42 Notice and Service of the s45 Counter Notice

For all work and administration carried out between the service of the s42 Notice and Service of the Counter Notice by the Freeholder our Fees are £100 and £20 VAT

Ability to extend the Lease.

A Residential Lease can be extended if it was granted originally for a period of more than 21 years and it is owned for at least 2 years. Of course if the Freeholder consents it can be extended within the two year period. None of these rules apply to business leases which cannot be extended by this route. Nor do they apply to properties rented from a Charitable Trust as part of its Charitable Functions.

Public Pledge for Leaseholders.

This was produced in June 2019. The full details can be found on www.gov.uk if you Google in the above. The essence of the matter for existing Leaseholders is that if Ground Rent doubles more frequently than every 20 years the Lease can be varied to an increase based on RPI.  It is understood that the Legal Costs of the Leaseholder will be paid though we are not certain of this. It also follows that no Leases should contain such clauses.

Service of S45 Notice.

The Freeholder must serve a s45 Counter Notice on the Leaseholder who has applied for a s42 Notice. The Freeholder must serve the Notice within the time fixed in the s42 Notice which is 2 months or may be a little longer. In the s45 Notice the Freeholder must state whether he accepts the right of the Leaseholder to apply for an Extension. If he does not accept he must give reasons. If he accepts there is a right then he must state whether the figure is accepted. If it is not accepted then he must propose another figure.

Time for Negotiation after service of the s45 Notice.

After the s45 Notice is served by the Freeholder there is a 2 month period for negotiation between Leaseholder and Freeholder. During that time no application can be made to the body that deals with this-the First-tier Tribunal (Property Chamber). That is referred to as “the Tribunal.

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