Our Lease Extension Guide
In order to apply for an extended lease, you must serve notice on your landlord. The notice served upon your landlord will include the premium you expect to pay for the new lease. For the purposes of negotiation, your valuer will often advise you to put in a figure less than that which you ultimately expect to pay.
The date of service of the notice of claim is the “valuation date”, which will be used to calculate the amount of premium to be paid.
We recommend that the notice is registered at the Land Registry once served. This will protect your claim if the freeholder sells the freehold during the currency of your claim.
Once you have served notice on your landlord, he or she then has a period of two months within which to respond. The landlord will ask for a deposit to be paid which will amount to 10% of the premium that you have specified in the notice of claim. The landlord will also request access to the property in order to carry out a valuation of the property. The landlord will then serve a counter-notice which will usually admit the claim and will contain counterproposals in respect of the premium to be paid.
It is possible for the landlord to reject a claim, for example where the landlord has clear plans to redevelop the building. In order to reject the claim, the landlord must make an application to the court and prove the grounds for the rejection.
Negotiations for extending your lease
Once your landlord has served a counter-notice on you admitting the claim, the parties will commence negotiations for the premium to be paid for the new lease and the form of the new lease. Your valuer will conduct the negotiations for the premium to be paid. During this time, we will monitor the progress of the negotiations, supply any information that we are asked for and ensure that any key deadlines are met in order to protect your claim.
If negotiations stall
If negotiations are stalling, either party may apply to the First-tier (Property) Tribunal for any disputed issues, such as the price or the lease terms, to be determined. Such an application must be made by one of the parties before the end of six months following service of the counter-notice otherwise the claim for a new lease is deemed to have been withdrawn and you will be unable to make a further claim for a period of one year after that date.
Even where it is expected that the lease terms will be agreed between the parties, it would be usual to apply to the Tribunal for a hearing date as this acts to focus the minds of the parties to bring negotiations to an end. The hearing date is usually three to four months after the application is made.
Whilst it might be necessary to make the application to the Tribunal to protect your claim (because time is running out and terms have not been agreed) it is rare for the Tribunal to actually decide the lease terms. This is because a hearing at the Tribunal to determine the premium or terms in dispute can be expensive, and would only be advised where the difference between the valuers is significant and the gain would warrant any potential costs.
Completing your lease extension
The lease will be completed following the agreement of the premium and the terms of the new lease. The lease extension should be completed within two months of the terms being agreed as after that time has elapsed, either party may apply to the court to strike out the claim. The parties may apply for an extension of time but if the new lease is not completed within four months and the parties have not applied for an extension, the claim is deemed to have been withdrawn and you will be unable to make a claim for a further period of one year after that date.