Leasehold Extensions: The Basics

The Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993), introduced the right for tenants to request an extension on their existing tenancy. The Act gives eligible tenants the right to request a lease extension from their landlord with a payment of a premium and a peppercorn rent.

There are two ways of obtaining a leasehold extension. The first is by private treaty, which is where the parties mutually agree terms and then engage a conveyancer to draw up and complete the lease. This is likely to be the best way forward when there are no disagreements about the terms and there is consensus to proceed.

The other route is by a statutory process set out in the Act. This process is started by the tenant serving an Initial Notice on the Landlord setting out their claim for a new lease and the proposed terms. This should then be served on the Landlord at their address for service under the existing lease, or where different, their last known address, or that of their solicitor. The process of serving the initial notice triggers a two-month period for the Landlord to consider the claim.

If the Landlord decides that the Tenant is entitled to a new lease, then they must serve, within the two-month period, a notice confirming this. The notice will also set out which terms the Landlord is prepared to agree to, and which terms they wish to amend. Certain terms, if not already included, must be included in the new lease to be compliant with the legislation, whilst others, such as premium payable and term of lease are open to negotiation between the parties. There is a two-month time period for negotiating the terms. After this, and up to six months after the counter notice was served, either party may apply to the First Tier (Residential Property) Tribunal for a determination of the remaining clauses.

Conversely, if the Landlord disputes the tenant’s claim, he must not only serve a counter-notice explaining why, but he must also apply to the County Court within 2 months of the date of the counter notice. The Court will then decide the issue. It is entirely possible that, notwithstanding the Landlord’s objection, the Court will decide the tenant is entitled to a new lease anyway.

The third outcome, where the Landlord does not respond at all, can occur when the counter notice is defective, and not subsequently remedied, or not served at all. It is worth noting at this point that if the Landlord does not accept the tenants claim, but fails to make the Court application in time, he can be considered to have not served a notice at all. Irrespective of the reason, if a landlord fails to serve a counter notice, the tenant has six months to apply to the Court for a new lease. Whilst the power is technically discretional, it is now settled law that the Court must make the order if the relevant conditions are made out. The terms will be the same as those in the initial notice.

Once the terms have been determined, either by agreement, or by a judicial or tribunal ruling, the parties then prepare the lease and, once the necessary payment has been made, the Landlord can grant the lease, subject to a further time period of two months which can be enforced by Court order if either party fails to complete in time.

Get in Touch

For further information on leasehold extensions, contact Chris Miller at Barrett & Co in Reading on 0118 958 9711, or [email protected] who would be delighted to assist you. Or arrange a visit to our offices in Queens Road, Reading – simply use the form on our website to book a one hour fixed-fee consultation.

Further Reading:

Conveyancing

Conveyancing Information Sheets

Leasehold Properties – Points to Consider

Cuius est solum, eius est usque ad coelum et ad inferos

The Reynolds Report- Landlords beware!

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