Do you want to know how to extend a leasehold? First, you need to make sure you’re eligible, in other words, you have owned the leasehold property for at least two years. Then you need to follow a set of pre-determined steps involving a professional Lease Extension Valuer and a qualified solicitor. Here they are.
The leasehold extension process made simple – First, get a RICS valuation
First, you need a property valuation, which will give you a clear picture of what it’ll cost to extend your lease, as well as clarifying the potential lowest, middle and highest costs. Some specialists offer a desktop valuation, but a visit is by far your best bet.
A properly-qualified RICS surveyor is essential since they’ll need to use their expertise to come to a good, detailed understanding of the building’s layout, floor area, condition, and any improvements you’ve made that have boosted its value beyond the norm; the ‘lease maintained condition’. Because you don’t pay the increased value of the improvements you’ve made, it’s sensible to make sure your surveyor knows about everything you’ve done to enhance the place’s value.
Let’s go into a bit more detail. Imagine two identical-size flats in the same building. One has a new kitchen, bathroom and carpets, valued at £100,000 for a lease extension. The other flat hasn’t been upgraded and is valued at £80,000. In this case, your chartered valuer will make relevant deductions for the first flat’s tenant-led improvements because the flat can only be valued ‘in its original condition’. For the purpose of a lease extension, the improved property might be valued at £80,000 rather than £100,000.
The point is, the tenant can’t suffer, nor the landlord benefit if the tenant has added to the flat’s value. The landlord can’t suffer if the tenant hasn’t kept the property in good repair, either. Even if the flat was in a terrible state and only valued at £60,000, your lease extension valuer would still value it at £80,000 for lease extension purposes.
Second, choose a solicitor
Now you know the value of the property, you can go find a solicitor. It’s their job to serve something called a Section 42 Notice to your landlord. This tells the landlord you want to extend the lease and makes your formal offer, something called the ‘premium’, which is found in the surveyor’s valuation documentation.
Third – serving the notice
Once the solicitor has successfully served notice to your landlord, you need to wait for the freeholder to reply. This should happen within two months of the date the Tenant’s Notice was served. This notice serving is actually one of the most vital elements of all because it marks the point at which the valuation is fixed and can’t go up. The date of the Notice is the same as the valuation date, and even if there’s a surge in market values since it was valued your valuation can’t increase.
Fourth – Your landlord replies
The landlord sends a ‘receipt of a landlord’s counter-notice’, which officially confirms the landlord’s lease extension counter-offer, usually at the top end of the valuation. At this stage it’s good to talk to your Surveyor again and get their personal opinion. Is it a good enough deal, or should you negotiate? The landlord has the right to ask for 10% of the premium offered in your tenant’s Section 42 Notice.
If your landlord doesn’t respond, talk to your solicitor about the next steps. You may end up applying to the County Court for a Vesting Order, which takes the matter out of the landlord’s control. It’s likely the court will likely grant you a new lease because of the landlord’s default, the terms of which are detailed in your original Section 42 Notice.
Fifth – You negotiate
Assuming your landlord responded in time, your Surveyor and the landlord’s Surveyor will start negotiations at this stage. They’ll look into everything from the valuation of the property under the current lease to the valuation on a long lease. Once they are in agreement they’ll come to a final number, which must be paid to the landlord for your leasehold extension minus the deposit if there is one.
Can our Lease Extension Valuer experts help you?
We know the London property scene intimately, and we’re highly experienced Lease Extension Valuers. Can we help you get your leasehold on a better footing for a brighter future?