GENERAL MATTERS:

You may not be fully aware of the provision of the Leasehold Reform, Housing & Urban Development Act 1993 which provides to residential long leaseholders the right to collective enfranchisement and to an extended lease. These rights became enforceable from the 1st November 1993.

Provided you have owned your flat or maisonette for more than two years, you are entitled to a 90 year extension to your current lease. Once you have extended your lease, the ground rent will become “peppercorn” (i.e. £1 per annum) for the entire term.

Before applying for a lease extension:

Before commencing formal proceedings or negotiations, it is recommended that you obtain a formal valuation from an independent chartered surveyor as to the likely premium and associated costs.

The benefits of obtaining a lease extension include;

• Increasing the value of your property
• Enhancing saleability if you decide to sell
• No more ground to pay for the duration of the entire term

The Procedure:

The Initial Notice:
Once you have decided to apply for the lease extension, you will need to instruct a solicitor to serve a formal notice on your behalf under Section 42 of the 1993 Act. If you do not have a solicitor acting for you, we would be  pleased to recommend.

Information contained within the Notice must include;

• the full name or names of the leaseholder and the address of the property;
• sufficient information to enable the freeholder to identify the property;
• details of the lease including the commencement date and terms;
• the proposed premium;
• the terms that the leaseholder proposes for the new lease; (if different from the present lease)
• the name and address of the leaseholder’s representative (usually the solicitor)
• a date by which the landlord must serve Counter-Notice, which must be not less than two months from the date of Tenant's Notice

If any of the above information is missing or incorrect, it may invalidate your Notice and by implication your application for a new lease. Your solicitor should be aware of this and check the Notice carefully to avoid any errors.

The Landlords Counter-Notice;

The landlord must serve his Counter-Notice by the date specified in the leaseholder's Notice. It can;

• Agree your right to the new lease and accept your terms (or propose alternative terms), or
• not admit your right and give reasons, which will need to be determined by the county court, or
• Claim right of redevelopment; the landlord can refuse to grant the new lease if he can prove to a court’s satisfaction that he intends to demolish and redevelop the building. This only applies to applications where the remaining period of the lease is less than five years from the date when the notice was served.

Negotiation:

If the leaseholder and landlord cannot agree the premium or any other aspects of the conveyance (such as terms of the new lease or costs), there is a statutory period for negotiation of at least two months but not more than six.

At this stage, we will attempt to negotiate a settlement with the other side’s surveyor. If agreement is reached, matters can complete in the normal way.

If a settlement is not reached, the solicitor will need to make an application to the Leasehold Valuation Tribunal (LVT) for an independent determination on any unresolved issues. These can include;

• The premium for the lease extension.
• The costs claimed by the Landlord including reasonable solicitors and professional fees.
• The terms of the new lease.
• Any compensation due under Commonhold and leasehold Reform Act, 2002 - Schedule 12 (10) (3) up to a maximum of £500.00. This will only be given where either party has acted unreasonably.

The Hearing;

Once an application is made, the LVT will issue directions, which include a timetable for when a draft lease must be submitted to the tenant’s solicitors and an exchange of valuations between the surveyors.

Once valuations have been exchanged, we will be able to advise you on the main areas of disagreement and whether it would be more sensible to try to reach agreement by negotiations or whether it would be advisable to seek a determination from the LVT.

In cases where we believe it would be in your best interests to obtain a determination of the LVT, we will need to prepare submissions, which include an Expert report from us and a Statement of Agreed Facts and Matters in Dispute.

We will then attend the hearing on your behalf, giving evidence and providing comparables and other relevant evidence to support our case. We have attended many such hearings over the last few years and have considerable expertise in this regard.

The Decision:

The LVT issue their decision, normally within four to six weeks, with a commentary on the hearing and how it came to its decision.

The decision is binding with extremely limited rights of appeal. Any appeal must be made within 28 days of the decision being published and can only be made with the permission of the LVT. The only realistic grounds for an appeal is on a point of law.

Completion:

Once the decision is issued, the parties have two months in which to complete the matter.  If this period elapses without completion of the new lease, then the leaseholder must apply to Court within a further two months requiring the Landlord to meet his obligations.

The Court can then force the landlord to complete or it will complete the transaction on their behalf. Any costs incurred as a result of this can be claimed from the Landlord, usually by deduction from the premium.

If there is no application for a Court order, the tenant is deemed to have “withdrawn” and the landlord is no longer obliged to complete and can in fact sue for costs. Furthermore, you will not be able to serve a fresh notice for one year.

Note: It is not uncommon for some unscrupulous landlords to attempt to deliberately prolong, or delay, the legal formalities to try to avoid completion. This is most common in cases when they consider they have had a poor result. It is important therefore that your solicitor diarises the relevant dates.

The above information is meant as a general guide only. Should you require any further information or advice, please do not hesitate to contact the writer.

Andrew Cohen, MRICS
Director