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Lease we extend…..

 

Recent changes in law regarding leasehold and, in particular, lease extensions may have gone unnoticed. These changes introduce new procedures for lease extensions and came into effect in January 2025.

The Leasehold and Freehold Reform Act 2024 received Royal Assent and came into force in January 2025 (“the New Act”). It marks the second phase of efforts to amend the Leasehold Reform Housing and Urban Development Act 1993 (“the Act”).

The  New Act makes long-term changes to homeownership for millions of leaseholders and homeowners on managed estates in England and Wales.

Before the new law, lease extensions were governed by the Act, as amended by the Commonhold and Leasehold Reform Act 2002. For lease extensions it meant that if you wanted to apply under the Act, you would need to be a “Qualifying Tenant” which required the applicant having ownership of a flat under a long lease for at least two years, not being under a business lease or where the immediate landlord under the lease is a charitable housing trust.

A significant change was made by section 27 of the New Act, which was the abolishment of the requirement to have at least 2 years to be a Qualifying Tenant. This means that a lease extension application can be made as soon as the lease is granted, without the requirement to wait for two years. This simplifies the process and avoids unnecessary delays, in turn allowing landlords more control over their investments and purchasers to extend the lease straight after acquisition. This is also favourable in situations where a mortgage needs to be secured.

A change has also been made to the legislative requirement on which the new lease is granted, previously this was to be at a peppercorn rent for the whole of the term (previously at 90 years plus the time left on the current lease). The new term has now been extended to be up to 990 years! This change has been most welcome as it will give greater security for financial investments, saving on costs on the extension process and providing successors in title with greater certainty and flexibility.

What can we do for you:

The process of securing an extension can seem daunting and overwhelming; however, for those in the field of expertise, it is a matter of ensuring that all the information required has been provided and the notice periods have been adhered to. By following the procedural requirements, you ensure that the leasehold is protected during the extension process and have the necessary knowledge and resources to complete it.

It is important to note that a valuation surveyor will need to be instructed to advise upon the correct premium for the lease extension. Once the formal procedure of serving notice has been initiated, it follows a prescribed route. Prior to this, it is important that preliminary steps have been taken to ensure that you are able to comply with the demands that will follow, including the financial implications eg. payment of a deposit, the premium and professional fees.

There will be some requirements from the landlord that must be complied with but key will be strictly following the process set out by the Act.

Engaging a solicitor means relying on their knowledge and expertise on the matter. This can particularly important where the landlord serves a counter-notice; as this could lead to you having to negotiate aspects of the new lease, in an effort to ensure the matter is not referred to the Leasehold Valuation Tribunal, where it will take time to determine the matter and significantly increase costs.

To discuss how this change affects your current lease, or if you have any questions or queries relating to lease extensions or renewals, please contact Bhavani Hogarty on either 01935 385987 or bhavani.hogarty@pardoes.co.uk.