Lease extension advice

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Q What is the right option when it comes to extending a flat lease?

A When considering extending a flat lease the information, processes and decisions to be made are often overwhelming. We find that many people bought leasehold flats without realising that they would need to extend the lease at some point in the future.

There are, in fact, two possible options available to you to obtain a lease extension; firstly, through private agreement with your freeholder, and secondly, by serving a statutory notice on your freeholder.

A private lease extension can often be quicker and cheaper in terms of the fees you will be responsible for. However, there is an element of risk associated with all private lease extensions in that the freeholder could change his mind and/or withdraw from the transaction at any time up to completion of the new lease.

There is also a further risk that the terms offered to you by the freeholder may be unfavourable to you; to the extent (in the most extreme cases) that they would damage the mortgageability and saleability of the flat.

Those terms are, generally speaking, offered on a ‘take it or leave it’ basis with little scope for negotiation to obtain more favourable terms.

As such, you may decide not to proceed with these. If you have a mortgage lender with a charge over the flat then you may be unable to proceed if the terms offered to you by the freeholder would be disadvantageous or onerous to the leaseholder.

Under the statutory process a leaseholder is able to force the freeholder to grant a lease extension of an additional 90 years on top of the unexpired term and nil ground rent.

This process does tend to be more expensive in terms of the premium and the associated legal and valuation costs. The freeholder has very limited capacity to be able to modify or introduce new terms within the lease. The benefit of the process is that the leaseholder is guaranteed to obtain a lease extension, assuming the process is followed to the letter.

I am often asked which process is better/right?

The short answer is that lease extension is not a one-size-fits-all so the decision as to which route to follow should be made when considering the reasonableness of your freeholder (are they amenable or very commercially minded?), available funds for the process and how long you intend to keep the flat.

My advice is to always instruct a specialist solicitor in the process, as either route is plagued with pitfalls and it can be a very expensive exercise if a mistake is made.