Essentially, the shorter your lease the more it will cost you to extend. If you have a lease which is approaching the 80 year’ mark, you must start the ball rolling as soon as you can, as after the 80 year mark the cost of extending your lease increases considerably.
Shorter leases are less desirable to mortgage lenders and can put off potential buyers. The investment is worth making and it is essential you do not become complacent and postpone extending your lease however much it may seem daunting. In both cases you will need to agree a premium which is payable to your landlord for extending your lease.
There are two routes to extend your lease, formal and informal.
Also known as Statutory, Section 42, Under the Act lease extension.
If you have been the registered owner of your leasehold property for two years, you should be a qualifying leaseholder entitled to extend your lease under the Leasehold Reform, Housing and Urban Development Act 1993.
The formal route will grant you a term of 90 years in addition to your current term and will reduce any ground rent you pay to a peppercorn (zero).
In order to exercise your right under this act you will need serve a notice , known as; a Section 42 Notice, on the landlord stating the premium you wish to pay and thereafter the process is governed by strict timescales and protocols which must be followed by both parties. If you are unable to agree a premium with the landlord, then the matter can be escalated for the court to decide.
Also known as voluntary, private, open market, or by agreement lease extension.
There are no set terms or eligibility requirements.
The route involves negotiating the terms directly with the landlord. Often the landlord will agree a shorter extension with a continuing or increased ground rent at a lower premium. If the terms are acceptable then the matter can be completed swiftly.
Landlords can impose unfavourable terms, withdraw or delay completion and in such cases, you would need to revert to the formal route.
Whilst we have tried to simplify the process and give you an insight, extending your lease under both routes can be a complicated and costly process. Naveen Palram at The Sethi Partnership Solicitors has an in-depth knowledge and experience in dealing with all forms of lease extensions and can make the process much easier.
If you require more information relating to Lease extensions, please contact Naveen Palram in the Commercial Property Team at The Sethi Partnership Solicitors.
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