A lease extension is the process of adding years onto an existing lease to ensure that the ownership of the property does not revert back to the landlord. There are many reasons for increasing the term of an existing lease which include to increase the value of the leasehold property and to ensure that the property remains mortgageable and marketable.
On the 7th January 2021 the government announced in the upcoming session of Parliament, legislation will be introduced to allow leaseholders of houses and flats to extend their leases by 990 years at zero ground rent. As many leaseholders may be aware the current legislation only provides for an extension of 90 years plus the remainder of the unexpired term of the lease.
It is not unusal for a leaseholder wishing to extend their lease to be subject to a high premium which is calculated using a complex formula. An online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease and the government have announced that the calculation rates to be used will ensure the process is fairer, cheaper and more transparent. The formula used to work out the cost to leaseholders buying the freehold or extending their lease will include a discount for any improvements the leaseholder has made and a discount where leaseholders have the right to remain in the property on an assured tenancy after the lease expires.
Retirement leasehold properties will now have their ground rent restricted to zero. Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying 'development value'. Commencement of this provision (for retirement properties) will be deferred and come into force 12 months after Royal Assent.
The above reforms are expected to be implemented in two pieces of legislation but there has been no confirmation of definitive timescales at the time of writing.
If you are considering extending your lease and would like to discuss whether it is in your best interests to proceed immediately or following the introduction of the reforms, our commercial property team is on hand to advise. Visit our dedicated web page on lease extensions for more information.
To book an appointment or to discuss your individual circumstances in further detail, contact us today on 01603 693500 or email us using the 'Make an enquiry' form on our website. To comply with social distancing rules, our team can offer telephone or video appointments from the comfort of your home.
*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
