lease extensions
📖 What is lease extensions? Meaning and definition
Lease extensions in the UK allow tenants to secure a new, longer lease for their property. This process is often undertaken under specific legislation, such as the Leasehold Reform, Housing and Urban Development Act 1993, which provides a framework for tenants to claim an extension. The extension involves agreeing on a premium payment, which is the cost the tenant pays to the freeholder for the new lease, and the terms of the new lease itself.
The process typically begins with the tenant serving a formal Notice of Claim to the freeholder. Following this, the freeholder may instruct a surveyor to value the property to determine the appropriate premium. If the parties cannot agree on the premium or other terms, the matter can be referred to a Tribunal for a determination. The Tribunal can assess the reasonable statutory costs incurred by the freeholder in connection with granting the new lease.
Once the premium and terms are agreed upon or determined by a Tribunal, the lease extension is completed, resulting in a new lease being granted. The costs associated with this process, including legal and valuation fees incurred by the freeholder, are generally payable by the tenant, provided they are deemed reasonable. These transactions can sometimes be straightforward, especially when premiums and terms are agreed without extensive dispute.
📋 Requirements
- A Notice of Claim must be served by the tenant under section 42 of the 1993 Act.
- The freeholder may instruct an independent surveyor to value the property.
- A premium payment for the new lease must be agreed upon or determined.
- The terms of the new lease must be agreed upon or approved by a Tribunal.
📝 Procedure
- Applicants make separate Notices of Claim under section 42 of the 1993 Act for lease extensions.
- The Respondent (freeholder) instructs an independent surveyor to value the properties.
- The Respondent issues Counter-Notices.
- Premiums for the lease extensions are agreed based upon valuations.
- The lease extension for each property is completed.
💡 Examples
- A tenant of four flats served notices to extend the leases on each property, proposing a premium of £800 per property, which was later agreed at varying amounts after a surveyor's valuation.
- A freeholder granted 123 new leases out of a building's freehold title, indicating a common occurrence of straightforward statutory lease extensions.
- A tenant applied to the Tribunal for a determination of the premium to be paid for a newly extended lease of their property, as they could not agree with the freeholder.
- The Tribunal determined that the premium payable for a newly extended lease was £50,159 and approved the form of the draft lease with some exclusions.
📚 Legal basis
- Leasehold Reform, Housing and and Urban Development Act 1993
❓ Frequently asked questions
What is a lease extension?
A lease extension is a legal process where a tenant prolongs the duration of their lease, often under specific laws like the Leasehold Reform, Housing and Urban Development Act 1993, by agreeing to a premium payment and new lease terms.
How do I start the process of extending my lease?
You typically start by serving a formal Notice of Claim under section 42 of the 1993 Act to your freeholder, proposing a premium for the lease extension.
What if I can't agree on the premium for the lease extension?
If you and the freeholder cannot agree on the premium or other terms, you can apply to the First-tier Tribunal (Property Chamber) for a determination, as seen in cases where the Tribunal sets the premium.
Who pays the costs associated with a lease extension?
Generally, the tenant is liable for the reasonable costs incurred by the freeholder in connection with granting the new lease, including legal and valuation fees, as provided by Section 60 of the 1993 Act.
Are lease extensions always complicated?
Not necessarily. While some can involve Tribunal applications, many transactions can be straightforward, especially when the premium and terms are agreed upon by the parties without significant dispute.
What is a 'premium payment' in a lease extension?
The premium payment is the sum of money the tenant pays to the freeholder in exchange for the grant of the newly extended lease. This amount is often determined by a valuation.