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
- The remaining term length is frozen, preventing a higher premium as time passes.
Disadvantages of statutory route lease extensions
- Slightly higher legal fees due to having to serve a section 42 notice. Expect to pay at least £200 more in legal fees for service of the notice. However the additional money spent here will most likely be recouped from achieving a lower premium.
- It might take slightly longer to agree premium (but this is usually offset by a better deal)
Is the statutory route the better option?
In nearly all cases, yes. Compare the formal vs. informal route.
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 at the tribunal 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.