Navigating the lease extension process can be a complex task, but Sue Taylor, an Associate Solicitor in WSP Solicitors' Residential Department, shares her insights into the voluntary route. For many leaseholders, this can be a more cost-effective and flexible option compared to the statutory process. In this blog, we'll explore the key differences, benefits, and steps involved in voluntary lease extensions.
What is the voluntary lease extension process?
The voluntary route to extend a lease is for the leaseholder to contact the landlord direct to negotiate the terms for extending the lease. This differs to the statutory route whereby notice has to be served on the landlord and certain procedures follows.
How the voluntary route is different from the statutory route
The voluntary route is considered to be more cost effective in respect of legal and surveyors fees. To start the process it would be necessary to contact the landlord to enquire if they would be willing to extend the lease and enquiring of their terms for doing so.
Cost advantages of the voluntary lease extensions
It is worth noting that the more years left unexpired on the lease, the less it would cost to extend. If you have a term less than 80 years, it becomes more expensive. Professional advice should be sought from a valuer as to the amount offered for the lease extension
There are differences between the statutory route and the information route
Steps to start a voluntary lease extension process
- You only have to make contact to enquire of the landlord if he is willing to extend and enquire of his terms. He can either accept your offer or specify his requirements
- You don't have to have owned the property for any particular length of time
- You can negotiate the amount to be paid to the landlord for the extension and
- You can negotiate the term of years (eg 999 years)
- The ground rent would be reduced to a peppercorn, ie nothing
What is the statutory lease renewal process?
- You have had to have owned the property for at least two years
- A Notice (section 41) has to be served on the landlord. This is best done by a professional advisor/Solicitor/valuer. The notice has to include sufficient information to identity you and the property and the terms that you propose
- The landlord would have to serve a counter-notice within 28 days to acknowledge the right to extend the lease and accept the terms specified in your notice. If the landlord does not respond, you can apply for a Court Order which will then take the matter out of the landlord's hands and grant an extension based on the terms in your notice.
- A second notice S.42 would then need to be served
- You have the right to extend the term of years by 90 years, eg if there are 60 years left you would then have 150 years
- The rent would be a peppercorn – ie nothing
Stamp Duty land tax could be payable if the amount paid to the landlord exceeds the minimum threshold which is currently £40,000
Most main stream mortgage lenders will not accept a short lease. The current general rule of thumb is that they require 80 years. Lenders have their own particular requirements
The Leasehold Advisory Service has much more information on their website which you can find here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
