An analysis of the statutory and voluntary routes from a tenant's perspective
If you own a leasehold flat, you may be entitled to a statutory lease extension. Alternatively, your landlord may be willing to extend your lease voluntarily.
In this article, I provide a brief outline of the main benefits and disadvantages for each type of lease extension from a tenant's perspective.
The process for extending the lease of a house is governed by different legislation. If you have any queries regarding a leasehold house, please do not hesitate to contact the Enfranchisement Team.
Statutory lease extension
A statutory lease extension is governed by the Leasehold Reform, Housing and Urban Development Act 1993 (Act) which provides a framework within which the extended lease is negotiated and granted.
Benefits of a statutory lease extension
- You are guaranteed to have 90 years added to the term of your lease.
- Your ground rent will be reduced to a peppercorn (nil).
- Your landlord is limited as to the amendments they can make to the lease.
- There are strict timeframes and deadlines to serve notices and deadlines to complete the lease extension.
- If the landlord fails to agree the terms of the new lease or the premium, you are entitled to ask the Tribunal to determine these.
- If the landlord refuses to complete, you are entitled to ask the Court to force them to do so.
- If a landlord serves an invalid counter notice, you are entitled to a lease extension on the terms of your claim notice.
Disadvantages of a statutory lease extension
- Not all tenants qualify for a lease extension. The most common bar to claiming a statutory lease extension is that you must first have owned the flat for at least two years.
- You are limited to what amendments you can make to the lease.
- You are required to pay for your landlord's costs however, the Act ensures that you are protected from being charged unreasonable amounts.
- If you withdraw from the process after you have served a claim notice, you will remain liable for the landlord's costs (as well as your own).
- The process is complicated and therefore it is easy for unrepresented tenants to make mistakes;
- Although the strict timeframes keep the process moving, if a deadline under the Act is missed and your claim is not protected, then your claim will lapse and you will have to wait twelve months before serving another claim.
- This process may cost more and take longer than a voluntary lease extension because it is more complex.
Voluntary lease extension
A voluntary lease extension is where a leaseholder approaches their landlord and asks if they are willing to grant a lease extension without the need to comply with the strict statutory requirements set out in the Act.
Benefits of a voluntary lease extension
- You can ask your landlord for any number of additional years and the level of ground rent can also be negotiated (which can lead to a lower premium).
- You can request any other amendment to the lease that you wish (although the landlord does not have to agree to your amendments, even if they are those that you would be entitled to under the Act).
- Your legal costs are likely to be cheaper than a statutory lease extension.
- On the whole, voluntary lease extensions proceed more quickly.
Disadvantages of a voluntary lease extension
- As this route is not governed by legislation and does not provide strict statutory timeframes, your landlord may withdraw from the process at any time and you may still be liable for their costs as well as your own.
- Your landlord can offer as many or as few additional years as they see fit so you are not guaranteed to be granted an additional 90 years.
- Your landlord can offer as low or as high a ground rent as they see fit so you are not guaranteed the peppercorn rent.
- The offer that you receive from your landlord is likely to be given on a 'take it or leave it basis', so if you are not happy with the terms proposed, there is very little room for negotiation.
- Your landlord can make any amendments to your lease without being governed by the Act.
- If your landlord requires that you pay their costs, there is nothing that ensures those costs are reasonable as with the statutory route.
- You may end up going down the statutory route anyway because your landlord ultimately does not grant the extended term.
- On the whole, the landlord will be in the driving seat.
Before you agree to a voluntary lease extension, it is very important to discuss any proposed provisions with your solicitor, particularly any changes to the ground rent that you are currently paying.
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.