1. Check who you should contact regarding the lease extension. This is known as “Identifying the Competent Landlord”. For clarification of the terms “Landlord” and “Freeholder”, please see the FAQ section “What is the definition of a Landlord”.
2. Instruct a surveyor to prepare a valuation on your behalf. It is essential to find a valuation surveyor who is experienced in lease extension and enfranchisement matters. The surveyor will inspect the property and calculate the value of the lease extension premium. The report will show three figures:
(i) The lowest figure likely to be achieved
(ii) The highest figure likely to be achieved
(iii) The figure you will submit to the landlord. This will form the basis of the offer that you will make and the subsequent negotiations that will be undertaken, to attempt to arrive at a reasonable figure. Your offer must be realistic, or the landlord can apply to the Court to have the application struck out. If the court agrees, you will have to pay costs and have to wait 12 months before you can re-apply. That is why it is essential to take good quality advice.
3. Instruct a solicitor to act on your behalf. The application for a lease extension is made directly to the landlord on an official form called a “Tenant’s Notice” or “Section 42 Notice” (in reference to Section 42 of the 1993 Leasehold Reform Act). The solicitor will check the information on the application, draft and submit it with the offer figure supplied by your valuation surveyor.
4. Once the notice has been submitted, a strict timetable comes into effect:
(i) The date of submission is considered to be the “Valuation Date”. So, however long the process takes, only the value of the lease extension on the valuation date will be considered as relevant to this application. It also freezes the length of the lease for assessing the premium. This fixed date is very important for leaseholders who want to avoid being on the wrong side of the 80 Year Rule. As long as you have submitted your application before the 80 Year deadline, you are safe.
(ii) The landlord may request further information, which they must do within 21 days of receipt of the Tenant’s Notice. The leaseholder must respond to this request within 21 days.
(iii) The landlord now has 2 months to respond with his own offer. This is known as the “Landlord’s Counter Notice” or “Section 45 Notice”. The landlord’s response might be:
(a) To deny that you qualify. This is unlikely to happen if proper checks are carried out prior to the application.
(b) If they recognise that you qualify, they can demand a deposit of 10% of your offer or £250, whichever is the greater. Remember that the leaseholder is liable for their own and also the landlord’s reasonable valuation and conveyancing costs (but not for the hearing or any negotiations). The landlord may then submit their counter offer. If their offer is unacceptable, your valuation surveyor can respond to it and negotiate on your behalf.
If they do not submit a counter-notice, the leaseholder must apply to court within six months for a vesting order. This means that the court will act as the landlord and will assume their responsibilities in the matter: accepting / rejecting the notice, requesting information and submitting the Counter-Notice.
(c) Over 95% of extensions are settled at this stage, but if negotiations fail, you must apply to the Leasehold Valuation Tribunal, who will take representations from both sides and produce a settlement figure. Application for the tribunal must be at least two months and no more than 6 months after the date of service of the Counter-Notice.
(d) You may appeal within 28 days of the decision of the tribunal, but only with their permission.
(e) After the 28 days appeals window is closed, the landlord has 14 days to provide the draft lease.
(f) After the decision has become final, the parties have two months to enter into the new lease.
(g) If the landlord has not fulfilled his duties in this regard, the leaseholder has to apply to the court within two months to enforce this.
(h) The premium is paid and legal completion takes place. It is unusual to go through all the stages listed here and with good will on both sides, you can expect the process to take 3 to 4 months. Less smoothly, it can take up to a year.
What are the responsibilities of the solicitor?
(i) Undertake the checks to confirm you are entitled to a lease extension.
(ii) Draft the Tenant’s Notice and serve it on your landlord and any other parties to the lease.
(iii) Respond to Landlord’s request for information in support of the claim.
(iv) Upon receipt of the Counter-Notice, the solicitor will negotiate and agree the form of the new lease, costs and any other terms with the landlord.
(v) Make any applications to the Leasehold Valuation Tribunal to determine a reasonable price for the lease extension, contest costs or lease terms if they are unreasonable and advance the process if the landlord is progressing slowly.
(v) Once terms are agreed, complete the Lease Extension and register it at the Land Registry.