Leasehold Reforms: How to Extend the Lease on my Flat

The current rules state that if you are a leaseholder of a flat and have been occupying it for more than two years, you have the legal right to extend your lease for an additional 90 years with the ground rent becoming a peppercorn, i.e., nil.

In most cases, you will be expected to pay a premium to the freeholder to extend your lease.

If your property's lease has less than 80 years left, you will have an additional premium called a marriage value.

In this article, our property litigation team look further into leasehold reforms.

The Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) gives the leasehold tenants of flats the right to acquire a new lease on the payment of a premium subject to the fulfilment of the statutory criteria (the Formal Route) or by asking the freeholder to negotiate a new lease (the Informal Route). The exercise of this right is more commonly known as a lease extension claim.

Two processes are now available to leaseholders: the formal and informal routes.

Under the informal route, a leaseholder can approach the freeholder to ask whether they will negotiate a lease extension. The freeholder is not obligated to respond or even agree to the lease extension. If the freeholder does agree, the parties will negotiate.

Starting the process informally could save time and money. However, there are risks with going down this route, as the freeholder may only agree to extend the lease by including onerous terms in the lease or for a high premium.

The formal route, described further below, offers more protection for a leaseholder. However, there is a procedure and strict timescales that must be followed.

The right under the formal route is to add ninety years to what is left on the existing lease at a 'peppercorn rent', meaning no ground rent is paid. However, the landlord is entitled to a premium for extending the lease based on a formula set out in the 1993 Act.

If the price and terms are not agreed upon between two months and six months after the service of the counter-notice, either party may apply to the First-Tier Tribunal for determination. The cost for submitting your application to the tribunal is £100, and the hearing cost (once you receive notice of a hearing date) is £200.

The tribunal's decision becomes final after twenty-eight days. Suppose you do not agree with the tribunal's decision. In that case, you can appeal to the Upper Tribunal (Lands Chamber) before the tribunal's decision becomes final, but only if the tribunal has permitted you.

After the tribunal's final decision, you and the landlord have two months to enter the new lease. If you decide not to enter the new lease within two months of the tribunal's decision becoming final, you have an extra two months to apply to the court to order the landlord to meet their requirements.