LEGAL Advice


HANDS UPforA LEASEeXtension


Frompersonal experience of acting for both landlords and tenants over the last five years, Ihavenoticed that in thecurrent economic climate,manylandlordshave adoptedamorepragmatic attitude towards thegrantingofvoluntarylease extensions. However, theestablished Fundsand Estates have notchanged theirapproach andalmost invariablystill insist that leaseextensionsare undertaken on a statutory basis. Likethe curate’s egg, voluntarylease


extensions aregood in partsandwhilethey may have benefits, tenants should proceed with caution.


Whobenefits? Voluntarylease extensions canbenefitboth landlord and tenant.Many landlords agree termsthatare favourable to themandmany tenantsare attractedtothe lowerpremium that is beingoffered. Butisthe offer on thetable anything more than wishful thinking? Be wary of a “take it or leave it” attitude. In reality a voluntary extensionmay not


be as attractive as it looks. Ialwaysadvise mytenant clientsinsuchcases to seek independentvaluation advice.Usuallythey have paid forthe landlord’svaluation butthis is neverindependent.There is always room fornegotiation andlandlordsare oftenwilling to discussthe premiumsought once asecond valuation is obtained by a tenant.


rightquestions Thetenantbeing offered avoluntarylease


Askingthe


extension should ask the following: nWhat is thetermbeingoffered?


In astatutory leaseextension andon theassumption that thequalifying criteria aremet under the Leasehold Reform,Housing andUrban Development Act 1993 (as amended) (“TheAct”),a tenant is entitled to a 90 year lease extension in addition


to theunexpired term.Itisuncommonfora voluntaryextension to be foranadditional 90 years.More common is an extensionback up to 99 or 125 years in accordance with the


existing term of the current lease. nWhat is thenewgroundrent? The voluntarylease extensionwillcommonly include aprovision forthe immediateincrease of thegroundrent. Underastatutory lease extension, ground rent becomes apeppercorn


(ie nil). nWhat arethecosts associatedwith the granting of thevoluntary leaseextension?


Section 60 of theAct setsout thosecoststhat aredeemedtoberecoverable andreasonable fromthetenantinastatutory leaseextension butinvoluntarycases,costsare notregulated by statute. Commonly, the landlord will seek to recoverhis fullcostsfrom thetenantand these should be agreed or at least sought before


committing to the extension. narethetermsof thenewleaseonerous?


TheAct stipulateswhatmodifications, additions andamendmentscan bemade to the newlease in a statutory extension. This is not the case in a voluntary extension, so checkwhether anyofthe termsinthe new leaseare likelytobeproblematic,onerous or


detrimental to the lease value. nis thereamortgage?Avoluntarylease extensionrequiresthe mortgagee’s formal consentbut by virtue of Section 58 of theAct, in a statutory lease extension the charge is automaticallycarried over to thenew lease


and formal consent is therefore not needed. ncanigoto thelVt?Anytermsincluding thepremiumin avoluntarylease extension do notattractthe protectionofthe


LeaseholdValuation Tribunal (LVT). nhowlongwill it take to complete? TheAct and accompanying Regulationsset outthe timetablefor completing alease extension. Thereisno such timetable in a voluntary leaseextension.


Has your landlord offered you a voluntary lease extension? If so,make sure you know exactly


what you are buying, warns Katiecohen


nis thedeal bindingonmybuyer?Whileit is possible forthe benefit of aSection 42 Notice to extend alease to be assignedtoabuyer to enable themto step into the shoes of the seller andexercisetheir righttoextendtheir lease, there is no similarmechanismin a voluntary leaseextension.Insuchcases,itisadvisable to ask the seller to serve the Notice on the


landlord to protect the buyer’s position. nis thedeal bindingonthelandlord?


Unfortunatelythere is nothingtoprevent a landlord fromwithdrawinginavoluntary case.Atenantmay thereforefind themselves in a positionwhere they have incurred legal andvaluation fees withoutanythingto show. Froma fees point of view, this can be overcomeif youmakesurethatasuitably worded undertakingfor alandlord’slegal fees is drafted stating that fees will not be paid if the landlord withdraws fromthe process.


eXtensionsA gooddeAl? Whilenot affordingthe protectionofa statutorylease extensionintermsof time limits, cost or the ability to go to the LVT foradetermination as to theprice payable andthe termsofthe newlease,voluntary leaseextensionsdohavebenefits.Theymay be quicker, cheaperand easier,benefitting both the tenant in terms of cost and the landlord with regardstothe retentionofa morefavourablegroundrent. Itmaybeworth agreeing both avoluntarylease extensionand statutorylease extensiontoseewhichhas the greaterbenefit. Everylandlord andtenantwillhave


Are voluntAry leAse


different aims andobjectives. Individual circumstances will governwhat works best in each casebut always seek professional advice before taking a decision.What is certain is that theapproach of landlordsischangingand if you do not ask, youmay not get.●


KatiecohenPartner,JPCLaw tel02076447261 emailkcohen@jpclaw.co.uk Webwww.jpclaw.co.uk


Voluntarylease extensions can benefitboth


landlordsand tenants


Flat Living Autumn2012


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