Subject to meeting certain criteria, lessees have the statutory right to acquire a new, extended lease of their flat in substitution for the existing lease. If it’s a long lease (i.e. if the original term was more than 21 years) it’s been owned by the lessee for at least two years, then they’re a qualifying tenant.
So, how does a lessee get this new, extended lease?
A word of caution……
Before embarking on this process, it’s important to understand that strict timescales apply during the various procedural stages of any claim. It’s important to ensure those timescales are adhered to, because the consequences of failing to do so can be fatal to the claim.
Beginning the claim
Although the first stage in the formal process is the service of the tenant’s notice of claim, there are some initial steps that a lessee will need to take before being in a position to serve their notice of claim.
First and foremost, a valuer will start the ball rolling and they’ll be instructed to advise the lessee on the premium to be paid to the landlord.
This premium will be set out in the notice of claim which, ultimately, will be served on the landlord.
As well as a valuer, a lessee is also likely to instruct a solicitor. It can be all too easy to get the notices wrong or miss the time limits and this will ultimately impact on the ability to obtain a lease extension.
Amongst other things, the solicitor will draft and serve the notice of claim. This notice sets out the leaseholder’s claim to extend their lease.
The notice is served on the “competent” landlord. A competent landlord is the individual or company that has the right to grant the lease extension. Typically, the competent landlord will be the freeholder but it is not uncommon for there to be intermediate landlords who will also have this right.
In any event, all relevant landlords will be served with the notice.
The notice is the first step in the process for acquiring a new extended lease. The lessee must bear in mind that they’ll be responsible not only for their own costs (i.e. those of their solicitor and valuer) but also the landlord’s costs from the date that the notice of claim is served.
The date on which the notice is served fixes the valuation date. This simply means that negotiations can start from a point of certainty and that no outside variables will impact on the negotiations.
More often than not, it’s the valuation of the that’s the most controversial element and will be the subject of negotiations between the parties.
Once served with the notice, it’s likely that the landlord will require access to the lessee’s flat so that the landlord’s valuer can carry out their own valuation.
The landlord is also likely to ask for the payment of a deposit (equal to 10% of the premium being offered).
The landlord will have to serve the lessee with a counter notice within the specified time in the notice of claim and this will confirm whether or not the claim for the lease extension is accepted or rejected by the landlord.
The landlord can also set out any other terms for the lease extension which they may want to include should the extension be accepted.
What if there’s a dispute?
It’s not uncommon for there to be some disagreement between landlord and lessee about the terms of the new extended lease and/or the premium to be paid by the lessee.
These disputes are often resolved by negotiation between the parties, perhaps with the assistance of valuers.
If those negotiations are not successful in resolving matters then either party can apply to the Tribunal no less than two months and no more than six months from the date of the counter notice.
The Tribunal will hear any cases and will determine the premium and the terms of the new lease if these cannot be agreed ahead of the hearing. In the vast majority of cases terms are agreed and there is no need for a final hearing.
Completing the process
Once the terms and premium have been agreed (either as a result of negotiation between the parties or because of a Tribunal determination), the parties will complete the new lease.