The 1993 Leasehold Reform Housing and Urban Development Act (as amended) gives a lessee the right to extend the lease, so long as the lessee has owned the flat for two years. The Act specifies that the extension to the lease is for 90 years added to the existing unexpired term and ground rent is expunged.
This is an important legal protection for leaseholders because as a lease gets shorter it loses value, and selling properties with short leases can be difficult as they become unmortgageable. A rule of thumb is that leases with lengths of less than 85 years can be problematic, and extending a lease with under 80 years remaining is more expensive. Further, some banks not lending on properties that have left than 70 years remaining on the lease, and nearly all lenders will not provide finance for leases with remaining terms of 60 years or below.
The legislation sets out the procedures to be followed when extending leases. It is activated by the service of a notice by the Tenants solicitors which must state the price (premium) payable by the tenant to the landlord. This premium is calculated by a Chartered Surveyor using valuation methods set out in the Act.
At LBS we offer a comprehensive service for both owners and tenants. We will prepare a valuation report, taking into account the relevant legislation and case law, which will give an indication of how much the lease extension will cost, allowing you to make an informed decision about how to proceed.