The Expansion of Lease Extensions
The inescapable fact of a lease is that its term dwindles away over time. All things being equal, eventually the lease will end and the leaseholder will have to leave the property.
That’s an uncomfortable prospect for anyone who lives in a leasehold flat.
The right to a lease extension
In recognition of that prospect, the Leasehold Reform Housing and Urban Development Act 1993 give leaseholders of flats the right to claim a lease extension from their landlord.
Leaseholders do not however only extend their leases when they are nearing their end. Mortgage lenders are often reluctant to lend on leases where the term is less than 60 or 70 years, and as a general rule leaseholders have been advised to extend their lease before it drops below 80 years because after that point they have to pay an additional amount, known as the marriage value, to extend their lease.
The two year trap
A difficulty for those who have recently acquired a lease has however been that they only qualified for a lease extension under the legislation once they had owned the lease for two years. That caused complications when leases which needed extending were being sold as the buyer did not have the right to extend it, and their bank was not willing to lend on it until it had been extended. It was then necessary for sellers to serve notice starting the claim ahead of a sale and then to assign the benefit of the notice to the buyer who carried the claim forward after the sale.
Abolition of two year qualifying period
Changes brought in by the Leasehold and Freehold Reform Act 2024 (“LAFRA”) have however just remedied that problem.
Under the new legislation, from 31 January 2025 a leaseholder no longer needs to wait two years before they can make an application for a lease extension. They will be able to claim a lease extension as soon as they are registered as the owner at Land Registry. This change should reduce the need for sellers to serve notices ahead of a sale and then assign the benefit.
The registration gap
A remaining issue however is that applications to register new owners at Land Registry can take a considerable period of time, and until registration is complete a buyer still will not be able to extend their lease. It remains to be seen whether further amendments to the law can resolve that issue.
How Longmores can help with seeking a lease extensions
At Longmores, our specialist leasehold enfranchisement team are very highly experienced in dealing with lease extensions and can provide you with all of the advice and assistance you need to complete the process successfully and efficiently.
To discuss how we can help you with seeking a lease extension please contact us and we will be happy to advise.
Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.
