Extending the lease on a flat – Informal Lease Extensions

Can I just approach my landlord for a lease extension?

If you are looking at extending a lease on a flat, and you either do not qualify for a statutory extension (because you have not owned the flat for at least two years), or you feel unable to afford the costs of a statutory extension, then we may be able to assist you in obtaining an informal lease extension.

This involves the freeholder voluntarily granting a lease extension. There is no minimum ownership requirement and so a leaseholder is free to make an approach to his/her freeholder at any time.

Your freeholder may be pragmatic in this situation and agree to ‘top-up’ your lease back to its original term, usually 99 or 125 years, subject to amending the ground rent provisions to a higher level of annual rent. An even shorter extension just to make your flat attractive to vendors and to enable a wide range of mortgages, possibly extending the lease term just back to say 85 years, is also something our team come across.

Freeholders are also able to request that other terms of your lease be amended.

Thinking of extending the lease on your flat? Looking for Specialist Solicitors? Call us on FREEPHONE 0800 1404544 for FREE Initial Phone Advice.

Informal Lease Extensions – the risks

Whilst this option may be available, and in many cases, works successfully for leaseholders, it is worth noting that there are certain risks in avoiding the formalities of the Leasehold Reform, Housing & Urban Development Act 1993 (“the 1993 Act”) and informally approaching your landlord for an extension. Why?

Your landlord may initially agree to the extension and then at a later date withdraw. As the process is voluntary there is nothing to compel your landlord to proceed if he/she simply changes his/her mind. This means that you would need to fall back on the 1993 Act provisions(i.e. going down the formal route), assuming of course that you qualify, in order to obtain a lease extension. This is likely to mean a duplication of lease extension costs for you and an overall delay in the process.

When offering you a premium to extend your lease there is nothing to compel your freeholder to offer a fair market-price. This is in contrast to the 1993 Act where there is a statutory formula to be applied when calculating the premium that you will pay for a lease extension. As such, the landlord’s lease extension valuation and offer is pretty much take-it or leave-it, with little room for negotiation. And that can mean you end up paying well over the odds for your lease extension.

You are unable to tie your landlord down to any time scales – so although they may initially agree to a reasonable price for extending the lease on your flat, you cannot force them to commit to anything binding within a defined time scale. In contrast, when making a formal application under the 1993 Act to extend your lease, the landlord is legally obliged to respond to the initial notice within 2 months
Any notice to extend the lease on your flat made under the 1993 Act means that the valuation of the property is fixed at the date when that notice is given. This becomes particularly important when a valuation is taken and notice is given near to the 80 year limit. Sadly, some unscrupulous landlords do often agree to an informal valuation and then simply drag their heels – especially when that crucial 80 year period is fast approaching, in the hope that they can delay matters until there are less than 80 years left on the lease, when they can insist on being paid the additional “marriage value” as part of the price for extending the lease on your flat.
Following the formal procedure under the 1993 Act allows you to challenge the reasonableness of the landlord’s costs and the amount of the premium they are charging – and to take your challenge to the First-Tier Property Tribunal for an independent decision if necessary.