Lease Extensions

By on Tuesday, March 24th, 2020 in Advice for Landlords, Guides.

Q: The flat we are selling has only 75 years left on its lease. The buyers want us to ask for a lease extension before we complete the sale, but we are worried that they will withdraw if the landlord is difficult. Can we simply leave it to the purchasers to handle the lease extension on the flat?

A: The right to a lease extension is covered by the Leasehold Reform, Housing and Urban Development Act 1993. An application is made by the leaseholder serving a notice on the landlord under section 42 of the act. Most lease extension applications are dealt with quickly within 9 months, with the premium agreed between specialist enfranchisement surveyors, but in some cases applications take much longer, with contested cases eventually being decided by courts or property tribunals.

The main problem for buyers is that under section 39 of the act the application can only be made by leaseholders who have owned the flat “for the last two years”. Buyers therefore have to wait for two years before giving a section 42 notice, by which time the price of extending the lease might have gone up.

The answer is to ask the seller to give the section 42 notice before the sale completes. The Act makes it clear that any pre-existing rights to a lease extension can be transferred to the buyers. Sellers therefore frequently agree to give a section 42 notice and then assign the right to take over the application at the same time that the sale completes. In most cases the buyers’ solicitor actually drafts the section 42 notice and sellers are reimbursed their legal costs of making the application to the landlord. Once the sale completes, the buyer simply takes over the lease extension application without having to wait and negotiates the premium with the landlord.

It follows that you are helping the buyer enormously by giving a section 42 notice before completion, but you can leave it to them to take over the lease extension procedure once you have sold.

Lease Extensions
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