2.1 Lease Extensions of Flats: Qualifying Lease Criteria – Length, Rent, and Property Types
Chapter II of the LRHUDA 1993, encompassing sections 39 to 62, confers the right to acquire a new lease upon qualifying tenants. Section 39(1) is central, stating that a qualifying tenant of a flat has the right to a new lease of that flat. To qualify, the tenant must hold the flat under a long lease, as defined in section 7, and not fall within exclusions outlined in section 5.
Amendments from the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) have removed the two-year ownership requirement under section 27 of LAFRA 2024. This change broadens access, allowing recent purchasers to claim extensions immediately, subject to other criteria. However, the focus here remains on the lease itself: its length, rent provisions, and the nature of the property.
Lease Length Criteria
The cornerstone of qualification is that the lease must be a 'long lease' as per section 7 of the LRHUDA 1993. This section defines a long lease as one granted for a term of years certain exceeding 21 years, irrespective of whether it may terminate earlier by notice, re-entry, or forfeiture. This threshold ensures that short-term arrangements do not benefit from extension rights, preserving the Act's intent for long-term residential security.
Additional categories under section 7 include leases with covenants for perpetual renewal (excluding sub-demises from non-long leases), leases taking effect under section 149(6) of the Law of Property Act 1925 (terminable after death, marriage, or civil partnership), and certain right-to-buy or shared ownership leases where the tenant's share is 100 per cent. For leases originally not exceeding 21 years but renewable without premium to exceed that term in aggregate, they are treated as long leases.
Rent Considerations
While rent is not a standalone qualifying criterion for most flat lease extensions, it intersects with lease length in specific scenarios. Under section 7(1)(c), a lease not exceeding 50 years may still qualify as long if it satisfies the low rent test in section 8. This test deems a lease at low rent if, at the commencement, the annual rent does not exceed specified thresholds: for leases before 1 April 1990, two-thirds of the letting value or rateable value; post that date, £1,000 in Greater London or £250 elsewhere, with adjustments for subsequent variations.
For flats, this provision is less frequently invoked, as most qualifying leases exceed 21 years outright. However, in instances of shorter original terms with low rents, perhaps historical conversions, it becomes relevant. Section 8A addresses leases granted at a premium, calculating whether the rent is low based on the premium's impact on yield assumptions.
Case law illuminates these nuances. In Boss Holdings Ltd v Grosvenor West End Properties [2008] UKHL 5, the House of Lords clarified rateable value applications, though primarily for houses; principles extend to flats where applicable. Advisers should note that high ground rents do not disqualify if the term exceeds 21 years, but escalating rents may affect premium calculations later. Practical tip: When rent borders low thresholds, commission a historical valuation to substantiate claims, averting challenges at tribunal.
Property Types and Definitions
The property must constitute a 'flat' as defined in section 101 of the LRHUDA 1993: a separate set of premises, whether on the same floor or not, forming part of a building, constructed or adapted for dwelling purposes, with the whole or material part lying above or below another part of the building. This vertical stratification distinguishes flats from houses, which fall under Chapter III.
Section 3 further refines premises for collective enfranchisement but informs individual extensions: self-contained buildings or vertically divided parts capable of independent redevelopment, with services independently providable. For extensions, the focus is on the flat's self-containment.
Case law has tested these boundaries. In Majorstake Ltd v Curtis [2008] UKHL 10, the House of Lords ruled that external areas like balconies could be included if integral to the dwelling, but structural elements might complicate claims. Similarly, in Aldford House Freehold Ltd v Grosvenor (Mayfair) Estate [2019] EWCA Civ 1848, the court examined whether a maisonette spanning floors qualified, affirming the vertical overlap requirement. These decisions underscore the need for surveyors to assess physical configurations meticulously.
Property types extend to include appurtenances like garages or gardens under section 62(2), if enjoyed with the flat. However, exclusions apply: business leases are barred under section 5(2)(a), as are flats provided by charitable housing trusts in pursuit of charitable purposes per section 5(2)(b). Sub-demises in breach of superior leases without waiver are also excluded.
In my experience, mixed-use properties pose challenges; if the lease includes significant non-residential elements, it may fail the dwelling adaptation test. Lawyers should advise on severing such elements pre-claim where feasible.
Appurtenant Property under Separate Leases
Appurtenant land, such as parking spaces, sheds, garages, or gardens, held under a separate lease can qualify for inclusion in a lease extension claim, provided it is claimed alongside the flat. Under section 7(6) of the LRHUDA 1993, two or more separate leases may be treated as a single long lease if they are granted by the same landlord to the same tenant, and one lease demises the flat (or part of it) or appurtenant property only, while the others demise parts of the flat or appurtenant property. This allows the extension to encompass the appurtenant property, ensuring comprehensive protection. However, if not included in the claim, there is no standalone statutory right to extend the lease of such appurtenant property alone. Professionals should identify these separate interests early, as overlooking them can lead to incomplete extensions and potential value loss.
Exclusions and Special Cases
Beyond core criteria, section 39(7) excludes underlying minerals if the landlord requires exception with support provisions. Sub-tenants qualify under section 39(3) if holding under a long superior lease, but Howard de Walden Estates Ltd v Aggio [2008] UKHL 44 clarified that sub-tenants may claim against intermediate landlords, not necessarily the head lessor.
Special cases include shared ownership leases qualifying only at 100 per cent staircasing, per section 7(1)(d). For properties in conservation areas or with heritage constraints, while not directly disqualifying, they influence terms under section 57 modifications.
Actionable insight: In multi-layered lease structures, map all interests early to identify the competent landlord under section 40, preventing procedural pitfalls.
Summary of Crucial Points
- Statutory Framework: Chapter II (sections 39-62) of the LRHUDA 1993 grants qualifying tenants of flats a 90-year lease extension at peppercorn rent. Section 39(1) defines the right, with qualifications tied to lease length, rent, and property type.
- Lease Length: A 'long lease' under section 7 requires an original term exceeding 21 years, including leases with perpetual renewal, certain statutory leases, or shared ownership at 100% staircasing. Verify original lease terms to avoid tribunal disputes.
- Rent Considerations: For leases not exceeding 50 years, section 8’s low rent test applies (e.g., pre-1990: two-thirds of letting/rateable value; post-1990: £1,000 in Greater London, £250 elsewhere). High rents do not disqualify if term exceeds 21 years.
- Property Types: A 'flat' per section 101 is a separate dwelling with vertical stratification in a building. Case law (e.g., Majorstake Ltd v Curtis [2008] UKHL 10) includes integral appurtenances like balconies; mixed-use properties may fail the dwelling test.
- Appurtenant Property: Section 7(6) allows separate leases for parking spaces, sheds, garages, or gardens to qualify if claimed with the flat’s lease extension, ensuring comprehensive protection when held by the same tenant and landlord.
- Exclusions: Business leases (section 5(2)(a)), charitable trust flats (section 5(2)(b)), and non-waived breaching sub-demises are excluded. Sub-tenants may claim under section 39(3), per Howard de Walden Estates Ltd v Aggio [2008] UKHL 44.
- Practical Advice: Lawyers should review leases forensically, surveyors assess flat configurations, and advisers use section-aligned checklists. Avoid pitfalls like overlooking low rent tests or business use, leveraging case law for contentious cases.