Rights of leaseholders of flats to extend leases
Rights, conditions, procedure, and costs for extending the lease on flats, usually on the same terms as the old lease.
The right to extend the lease on a flat
The right to extend the lease gives leaseholders the right to claim a new lease for a term of 90 years longer than the existing lease at a premium and at a peppercorn (zero) rent. This right can be claimed as many times as the leaseholder wishes, but once it has been used there will be no other statutory protection at the end of the lease.
Where there is a claim to buy the freehold prior to the granting of the extended lease (ie a claim for collective enfranchisement) the enfranchisement takes precedence. A potential advantage of extending a lease above buying the freehold is that the former is an individual right, so there is no requirement to act collectively with other residents.
Qualifying conditions for extending the lease on a flat
The qualifying conditions for the right to extend the lease are similar to those for collective enfranchisement.
The conditions are:
the lease must be a long lease, ie a lease for at least 21 years
the leaseholder must have been a qualifying tenant for the last two years
the lease must not be a business lease
the landlord must not be a charitable housing trust where the flat forms part of accommodation provided as part of that trust's charitable aims
Unlike collective enfranchisement, if a leaseholder owns more than one property, they can claim the right on all of them. No flat can have more than one qualifying tenant at any one time.
Premises excluded from the right to extend the lease
Fewer premises are excluded from the right to extend the lease than from the right to enfranchisement.
Crown and National Trust properties and those in a cathedral precinct are excluded from the provisions.
Procedure for extending the lease
The provisions regarding information about the freeholder and the service of initial and counter-notices are very similar to those for collective enfranchisement. For lease extension, notice is served under section 42 of the Act.
Where the terms of the new lease are disputed, the leaseholder or the freeholder may apply to the First-tier Tribunal (Property Chamber) under section 48 of the Act for a resolution of the dispute.
Terms of the new lease
The new lease is usually on the same terms as the old one, apart from it being at a peppercorn rent and for and additional 90 years
The Act specifies the situations in which the new lease may be varied, including where:
the new lease is in respect of a property that has been altered, or is an amalgamation of more than one existing lease
the landlord agrees to provide additional services such as repairing or insurance (the lease will be varied as is just to make corresponding provision for the leaseholder to pay for them through service charges)
there has been a change of circumstance, to the extent that this is reasonable
the old lease did not contain statements that are compulsory
the old lease was 'defective'. The term 'defect' is interpreted strictly. In one case the Upper Tribunal held that where a term of the original lease enabled the landlord to collect far more in service charges than it was actually spending, this was a defective term
The burden is on the party who would like the change to show why the the change is needed, and that the proposed modification would cure, not simply reduce the problem complained of.
Price of the new lease
The purchase price is sometimes referred to a premium.
The purchase price for a lease extension is the total of the:
reduction in the value of the landlord’s interest in the flat as result of the grant of the new lease
landlord’s share of the marriage value (ie the increase in the value of the leasehold interest as a result of the grant of the new lease)
compensation for any other loss of the landlord arising from the grant of the new lease
The LEASE leasehold extension calculator can give an estimate of the premium.
If the freeholder and leaseholder cannot agree a premium, the dispute can be referred to the First-tier Tribunal.
Freeholder right to redevelop
A landlord can resist a claim for an extended lease if the lease is due to end within five years of the leaseholder's claim and the landlord intends to redevelop the whole or substantial part of the premises in which the flat is contained.
As with the similar right in the case of collective enfranchisement, the freeholder must make an application to the court within two months of the counter notice.
The Commonhold and Leasehold Reform Act 2002 removed the residence requirement from the qualifying conditions.
The House of Lords has held that a head lessee of a number of flats may be a 'qualifying tenant' for the purpose of extending a lease, either of an individual flat, a number of flats, or an entire block of flats. It does not matter that the head lessee has control over common parts of a building, or if there is a mixture of business and residential units within the building. The purpose of holding the lease as an investor or resident is irrelevant.
Disputes about extending the lease
Disputes regarding the terms or the price of a new lease can be dealt with the the First-tier Tribunal. Other disputes can be referred to the county court.
See the Leasehold Advisory Service lease extension guide for leaseholders for more information.
Last updated: 13 March 2021