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Flats - Your Right To A Longer Lease,
And The New Law Extending Your Right (updated
June 2006)
Your right to a longer lease of your flat was first introduced
by the Leasehold Reform, Housing & Urban Development Act,
1993.
Under that Act, if you are a qualifying tenant and satisfy
a residence test, you have the right to a longer lease of
your flat.
Q: Am I a qualifying tenant?
A: To be a qualifying tenant you must own a long
lease of your flat and must be paying a low rent
• a long lease means a lease which was originally granted
for more than 21 years; it does not matter if there are less
than 21 years left. If you own the lease with somebody else,
you are together a qualifying tenant
• the low rent test has been abolished by the new law;
see below.
Q: Do I satisfy the residence test?
A: You satisfy the residence test
if you (or another person who owns your lease with you) have
occupied your flat as your only or main home for the last
three years or for three years in the last ten. This test
has been abolished by the new law; see below.
Q: What am I entitled to in terms of a longer lease?
A: The longer lease to which you are entitled is
90 years added on to the number of years left on your existing
lease. Therefore, if your lease has 30 years left, you will
get a lease for 120 years. Any ground rent which you pay will
be reduced to a peppercorn.
How Has The New Law Extended My Right?
The new law is contained in The Commonhold and Leasehold
Reform Act 2002 and aims to make it easier to extend your
lease by removing the tests referred to above and replacing
them with the simple requirement that you have owned your
long lease for at least two years. Thus the right to a longer
lease referred to above is now also available:-
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in respect of a flat or flats owned as second or holiday
homes |
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in respect of a flat or flats owned as investments |
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to companies. |
The two year ownership rule is designed to discourage the
acquisition of flats by speculators intending immediately
to extend leases and then to sell them at a profit.
What Must I Pay My Landlord For The Lease Extensions,
And Have There Been Changes Here Also? What Other Costs Are
Involved?
The calculation of the price payable to your landlord can
be complex and includes three components:-
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the reduction in the value of the landlord’s
interest in your flat as a result of the lease extension |
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an element of the “marriage value”, and
in some circumstances |
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compensation. |
The new law makes significant changes to the marriage value
calculation in your favour so that:
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you will only have to pay 50% of the marriage
value rather than at least 50% of the marriage value |
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you will not have to pay any marriage value if the unexpired
term of your lease is 80 years or more. |
Additionally the valuation date is now to be fixed as the
date on which you give notice to the landlord of your wish
to extend your lease, so that any delays in the lease extension
process thereafter do not result in an increased price due
from you, particularly in a rising market.
In addition to the price payable for the lease extension,
you will also have to pay:-
• Your solicitor’s costs in taking the claim
through from the outset to completion and registration of
the lease extension at the Land Registry. Charles Russell’s
costs are estimated at £3,000.00 - £4,000.00 plus
VAT and disbursements. If the landlord is particularly obstructive
or if a hearing at the Leasehold Valuation Tribunal is necessary
the costs may be greater but in the vast majority of cases
this is avoided.
• Your valuer’s costs
• Your landlord’s reasonable legal and valuation
fees which will be ascertained at the earliest opportunity.
• Stamp Duty Land Tax on the price paid for the lease
extension, as follows, at current rates:-
£0 - £125,000.00 nil £125,001 - £250,000.00
1%
£250,001.00 - £500,000.00 3%
£500,001.00 plus 4%
• Land Registry fees usually £100.00 to £300.00.
Why Should I Be Interested In These Rights?
The shortening of any long residential lease has
a depreciating effect on it. This depreciation accelerates
the shorter the remaining term becomes. Your right to require
your landlord to extend your lease enables you to:
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stop the depreciation process and reinvest
in the property |
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avert a situation where prospective purchasers of your
flat are put off because the lease is so short and/or
because they cannot find a lender prepared to lend on
security of such a short lease |
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protect the value of your dependents’ inheritance. |
How Charles Russell Can Help
Charles Russell have an experienced team of property
lawyers who have worked for many years within the framework
of this area of the law.
Charles Russell have direct contact with valuers qualified
to give prompt and practical advice on all valuation aspects,
enabling leaseholders’ claims to be taken forward effectively
and efficiently.
The Next Step
If you would like Charles Russell to advise further
on your claim to a lease extension and the likely price involved
please contact us with:
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your name, address and telephone number |
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a copy of your lease, or details of the whereabouts
of the title deeds to your flat |
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a cheque in the sum of £500.00 on account of your
legal and valuation costs, made payable to Charles Russell
Client Account. |
Naturally before taking this step you will wish to discuss
matters further or in more detail with the author of this
article, Andrew Slatter, a partner in Charles Russell's London
Office.
Contact details:
Andrew
Slatter, Partner, Charles Russell LLP
Tel - 020 7203 5159
Fax - 020 7203 5300
Email andrew.slatter@charlesrussell.co.uk
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