- By private agreement with the freeholder (known as the ‘private route’)
- By serving a Notice under the relevant Act to force the freeholder to grant an extension (known as the ‘statutory route’)
What are the differences between the two routes?
A private lease extension can only proceed if the freeholder is willing as he/she cannot be forced to grant a lease extension this way. So, if the freeholder refuses, that is the end of the matter. Under the private route, it is common for freeholders to agree a shorter extension (for example, topping the lease back up to 99 years) and either keeping the current ground rent or increasing it. The freeholder can also change any existing clauses or provisions of the lease, or introduce new ones, with these proposals being on a ‘take it or leave it’ basis. The same can be said for the price payable for the lease extension; the freeholder can, if he wishes, just pluck a figure from thin air. There is little scope for negotiations because the freeholder cannot be forced to grant a lease extension this way; the freeholder knows that if his terms are not accepted, he can just refuse to grant the requested extension.
The statutory route provides that a leaseholder is entitled to claim a lease extension of an additional 90 years on top of the lease length he/she has left at nil ground rent. The premium payable to the freeholder for the grant of the new lease is calculated by a surveyor in accordance with a statutory formula. The statutory route offers more protection to a leaseholder as they are guaranteed to get a lease extension at the end of the process.
Do I have a choice which route to go down?
Under the private route, the leaseholder can approach the freeholder at any time to ask for a lease extension; it doesn’t matter how long he/she has owned the flat. If a freeholder refuses to grant a private lease extension. this route is no longer an option and the leaseholder will need to fall-back on the statutory procedure.
To claim a lease extension, the leaseholder must have owned the flat for two years.
It is important to fully investigate lease extension matters when purchasing the flat, otherwise you may find yourself in a position of having to wait for two years before the freeholder can be forced to grant a lease extension, by which time it may be significantly more expensive!
How do I proceed?
Leaseholders can contact their freeholder at any time to ask if the freeholder is prepared to grant a lease extension; alternatively a solicitor can do this for you. The freeholder will either indicate that he is prepared to grant a lease extension voluntarily, or he is not.
There is no right or wrong way to proceed with a lease extension, it depends on individual circumstances. It is, however, vital that leaseholders take specialist advice to protect their position as proceeding blindly can be a very expensive exercise.
Author: Samantha Marsh
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Glanvilles Solicitors directly.