Statutory Route Lease Extensions
The statutory lease extension process
Under Section 39 of The Leasehold Reform, Housing And Urban Development Act 1993 qualifying leaseholders have a statutory right to extend the remaining term on their leases. To pursue this route, leaseholders must proceed in accordance with the 1993 Act, which involves serving a formal notice on the freeholder and ulimtately making a claim to the First-tier Tribunal (Property Chamber).
This method is called the statutory route lease extension method. This method can only be initiated by a tenant serving a Section 42 notice on the landlord; this is a notice which sets out the proposed terms (the premium, length of the new term and ground rent changes).
What statute gives you
Eligible leaseholders are entitled under law to obtain a lease extension on the following terms:
- An additional 90 years to the existing term
- Cancellation of any ground rent
Who is eligible?
- The property is residential
- You must have owned the property for at least 2 years (or otherwise had the right assigned by a previous owner
- The orignal lease must have been granted for over 21 years
- The lease is excluded if the freeholder is a registerd charitable housing trust
Advantages of statutory route lease extensions
- The landlord cannot overcharge
- Ground rent is abolished
Disadvantages of statutory route lease extensions
- Expensive legal fees. Expect to pay at least £3,000 more in legal fees by choosing the statutory route
- Time consuming (no less than 9 months)
Is the statutory route the better option?
Most leaseholders never get to complete the full statutory route (through a Leasehold Valuation Tribunal hearing) as the legal costs and stress may outweigh the benefit of not paying a landlord's excessive charges. On that basis it may only be worth pursuing the full statutory route if the landlord's proposed premium is more than £3,500 over what you would expect to pay after carrying out a survey.
It is common for leasholders to commence matters by using the statutory route (serving a s42 notice and negotiating) however most never make it to the First-Tier Tribunal as 96% will reach an agreement before a hearing.