Extending the Term of your Lease
What does extending the lease actually mean?
Your lease has a certain term or length (Colchester Borough Council Right To Buy (RTB) leases are for a term of 125 years) at the end of which the property will revert back to the Council. However, you have a legal right to extend it. If the length of your lease is getting close or below the critical 80 year mark, you will need to seriously think about extending the term of your lease. Please be aware that this can be a costly and complicated process, so it is imperative that you get the right expert help, such as a Solicitor!
Why do I need to extend my lease?
- Properties with shorter leases are less valuable than ones with long leases (This is particularly true if leases are below 80 years)
- Properties with shorter leases can be more difficult to get a mortgage on because mortgage companies will worry that it’s value may decline and so won’t be good security
- Properties with shorter leases can be more difficult to sell
What will it cost me?
- This will depend on the value of the property, the number of years left on the lease, the annual ground rent, the value of improvements done to the property by the leaseholder and external factors such as expected rate of returns on investments.
- On top of the cost of buying the extra years on your lease (the Premium), you will have to pay for the following:
- The costs of getting legal advice (Your Solicitor)
- The lease extension valuation report (a Surveyor)
- The Council’s reasonable legal and own valuation costs (Yes! You are required by law to pay these.)
- Land Registry Fees
If I want to extend my lease, how do I go about it?
- To qualify to extend your lease you must have owned the lease for at least 2 years.
- Formal Notice to the Council (Section 42 Notice)
- This is the formal application to extend the lease in which you will put the terms you are proposing to the Council (mainly the Premium)
- It is advisable to use a Solicitor to draft and serve the Notice, as it is a technical document and it is important to get it right
- The Counter Notice from The Council
- The Council has 2 months to respond to the Section 42 Notice by serving a formal Counter Notice stating whether they accept your offer
- The Council will have their own Valuation carried out at your expense and will state their Counter Offer in the Counter-Notice
- Next Steps
- If the Council disputes the proposed terms, usually the premium, there is a further 2 months from the date of the Counter Notice to negotiate a resolution.
- If the parties have not agreed on the premium by the end of the 2 month period there is a ‘window’ of 4 months in which either party can apply to the First Tier Tribunal to determine the premium. Both parties can still continue to negotiate during this period
- Once the terms have been agreed or decided by the tribunal, the parties have 2 months to enter into the new lease.
- If the lease has not been entered into during this time either party can apply to the County Court within a further 2 months to require the other to enter into the new lease on those terms
- Further Information