In a move celebrated by many leaseholders, Section 27 of the Leasehold and Freehold Reform Act 2024 was brought into effect on 31/01/2025. This legislation removes the two-year qualifying period requirement for leasehold extension.

 

While leaseholders may ostensibly feel like homeowners, the nature of a lease means that the property will return to the freeholder at the end of the lease unless renewed. The ability for a leaseholder to be able to renew their lease is therefore vital in order to protect the valuation of their property. Let’s examine how leaseholders can extend their lease in this article.

 

 

Who can request an extension?

 

Any tenant who holds a long lease in a flat can make such a request. If there are two or more long leases (say one is 25 years, granted out of a longer lease of 50 years, which was further granted out of a even longer lease of 90 years) in the same flat, all the leaseholders can make such request, with the occupational tenant  or the one who is close to the occupational tenant having the priority right.

 

If a flat forms part of a block of flats which is under a long lease, the leasehold of the flat can request for an extension of the lease for the whole block.

 

How long can a tenant request for the new lease to be?

 

A tenant can currently renew a lease by 90 years, in addition to the unexpired residue term (time remaining) of the current lease. Once section 33 of the Leasehold and Freehold Reform Act 2024 is brought into effect, this will be increased to 990 years.

 

What is classed as a long lease?

 

A long lease is one which is:

 

• granted for a term of more than 21 years, regardless of any right to forfeit, break, etc
• granted for a shorter term but with a right for perpetual renewal
• terminable on death, marriage or civil partnership (ie a lease taking effect under section 149(6) of the Law of Property Act 1925), although there are special rules for determining whether in any particular case such a lease meets the definition of a long tenancy
• terminable on an unknown date (i.e. a lease containing a so-called ‘Prince of Wales clause’)
• granted under the right to buy provisions (Part V of the Housing Act 1985) or pursuant to the (now abolished) right to acquire on rent-to-mortgage terms
• which is a shared ownership lease and the tenant’s share is 100%, or
• granted pursuant to the right to buy which is enjoyed by certain tenants of registered social landlords

 

How much will the rent for the new lease be?

 

When a lease is renewed, it will have to be a peppercorn (very low, symbolic value such as £1 per year). However, the tenant will need to pay a premium for such a new lease. Furthermore, the tenant will continue to pay the rent under the terms of the existing lease for the residue term.

 

 

When is it not possible to extend a lease?

 

In some circumstances, it may not be possible to extend a lease. This includes situations such as where:

 

• The flat has been let by a charitable housing trust for the purposes of its charitable functions

 

• The lease is a business tenancy protected by the Landlord and Tenant Act 1954 (LTA 1954) (for more information, see Practice Note: LTA 1954 business lease renewal—termination)
• The lease was granted by sub-demise out of a superior lease other than a long lease, the grant was made in breach of the terms of the superior lease, and there has been no waiver of the breach by the superior landlord
• The property is held by the Crown, although the Crown has undertaken to allow enfranchisement on the same terms as the Land Registration Act 1967 unless the land is within an excepted area, in which case a lease extension will usually be granted—see the Crown Estate policy and guidance papers for further information
• The property is vested inalienably in the National Trust, or
• The property is within the precinct of a cathedral church
• In certain circumstances where the lease is coming to an end, including where ‘any proceedings are pending to enforce a right of re-entry or forfeiture terminating [the] lease of the flat’, except with leave of the court. Leave will only be granted if the court is satisfied that the claim is not being made to avoid the consequences of the breach for which the landlord is forfeiting

 

What do leaseholders need to take into account when extending a lease?

 

Valuation

 

Although a formal valuation is not required, it is strongly advisable for a tenant to obtain valuation advice as to the likely premium and other amounts payable before serving a section 42 notice so that the likely costs are known before embarking upon the statutory process.

 

A valuation will also inform the decision as to the proposed premium to be inserted in the notice of claim.

 

Finance

 

The tenant will need to ensure that they have the necessary finance in place to be able to pay the premium (payable on completion) and the statutory deposit (which is payable to the landlord within 14 days of request at any time following service of the notice of claim).

 

The deposit payable is the greater of £250 or 10% of the figure for the premium specified in the notice of claim (see below: Deposit, deducing title and access).

 

Information

 

It is essential, before embarking upon the statutory process, to identify the freeholder and any intermediate landlords.

 

Requesting an up-to-date ground rent or service charge demand to identify the immediate landlord’s details can be the first step in this process.

 

An index map search or a search through one of the National Land Information Service (NLIS) channels should reveal the freeholder and intermediate leasehold interests. However, if there are unregistered titles specific enquiries may need to be made of the known landlords.

 

s 41 of the Leasehold Reform, Housing and Urban Development Act 1993 provides that the tenant may serve notices requiring information to be provided.

 

What is the process of making a leasehold request?

 

1. The qualifying tenant can make a claim by serving a section 42 notice on a competent landlord who can be the immediate or other superior landlords who is able to grant the lease required.

2. With 2 months of receipt of the section 42 notice, the landlords should serve a section 45 counter notice to the tenant, to either admit or decline the request. If the landlord wants to decline the claim, they need to apply to the County Court for a declaration that the tenant has no right to make such a claim within two months of serving the counter notice.

3. If the landlord admits the section 42 claim, the parties will negotiate the terms of the new lease. If they cannot agree with them within two months of the service of the counter notice, an application can be made to the first-tier tribunal for the Court to decide on the terms.

4. Once the terms are determined, the parties can then draft a new lease on the terms.

 

Is informal negotiation possible?

 

Of course! Tenants and landlords can always talk to each other and reach agreements on the premium and terms of new leases without following the above procedure. In most cases, informal negotiation can come out as a cheaper and faster way to resolve the relevant issues.

 

Final thoughts

 

Lease extension is a complicated topic, and at a time when reform to the system is expected, leaseholders may not be sure about whether to extend their lease or wait for further legislation to become law. This may be particularly true if your lease is nearing the 80-year point, when “marriage value” kicks in. For expert advice, including lease extension, contact our conveyancing team today.

 

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