Residential lease extension – leaseholders

Your lease is a contract granting use of the property for a number of years. Your leasehold term is for a set amount of time, which is typically 99 or 125 years but can range anywhere up to 990 years. The number of years your lease is granted will be set out in the lease particulars and on the Land Registry title documents.

As your lease gets shorter, the value of the lease decreases and in turn can affect the value of your home. It may also cause issues when obtaining a mortgage/re-mortgaging, as lenders are often reluctant to lend on a lease with less than 80 years left on it.

A lease extension may provide you with more security. If your lease expires, your property will revert to us as we are the freeholder of the property, This will mean that you no longer have a lease and therefore no legal right to occupy the property.

Extending a lease is a statutory right for 100% residential leaseholders (who own 100% of their property) as long as you meet the eligibility criteria detailed below.

To be eligible to extend your lease under the statutory route, you must be the leaseholder and hold a lease:

• with a term of 21 years or more
• granted under the Right to Buy or Right to Acquire
• granted under the Social Homebuy scheme with 100% ownership

As an outright leaseholder, you have two options to extend your lease:

• Option 1: Proceed formally. This would follow the legal procedure laid down in the Leasehold Reform, Housing & Urban Development Act 1993
• Option 2: Proceed informally. This would be by legal agreement between us and you. It would still broadly follow the principles of the above Act

If you wish to extend your lease under option 1, we advise that you seek independent legal advice to confirm whether you do have this right and to obtain advice about the consequences of following this procedure. More information about this route can be found on the Lease Advice website.

We are happy for you to follow whichever route you choose, but option 2 has the following benefits:

• It is much simpler for both parties
• Legal fees may be less than option 1
• You may only need to pay for one valuation, unlike in option 1 where you need to pay for your own valuations as well as our independent valuation to verify your valuers’ findings
• We may have more flexibility on what we can agree if you wish to update or change any of your existing lease terms

For all lease extensions, your current lease will be surrendered, and we will grant a new lease for the extended term.

For formal applications, it’s likely that your lease will be extended for 90 years on top of the current term. This is the statutory lease extension allowance, but there may be occasions where the term can be less -this will be dependent on whether we own the freehold of your home or not and will be determined as part of the process.

For informal applications, we’ll extend your lease by 90 years as per the formal process if we are the freeholder of your home.

Where we’re not the freeholder, we’ll offer you the maximum term that we can within the limitations of our own Head Lease. We’ll confirm the term that can be provided as part of our process.

You can visit the Lease Advice website for impartial advice and use their lease extension calculator to get a guide price for extending your lease.

To apply for a lease extension, or for more information, please contact the Leasehold Team at leasehold@housingplusgroup.co.uk

All costs correct at time of publication

In addition to the above, if you choose option 1, you will need to pay for your own valuation as well as our independent valuation to verify your valuer’s findings.

The Premium is determined by an independent specialist Chartered Surveyor using the standard formula methods set out under the 1993 Act. The premium is designed to compensate the landlord for the loss of ground rent and the fact that the right to get the property back at the end of the term is postponed by 90 years. In addition, Homes Plus may be entitled to half of the “marriage value”.  The marriage value is the increase in value as a result of the extension.  No marriage value is payable where there is over 80 years left on the term of the lease.

The Government sponsored website at www.lease-advice.org contains a very good plain English guide to how the lease premium is calculated. There is also a calculator on this site you can use to obtain a rough idea of what the premium and marriage value (if applicable) is likely to be.

Other costs you may incur:

An application to extend a lease usually takes between 8-12 weeks.  However, this can be shorter or longer and you should allow for this.

While all efforts will be made to take into account individual circumstances, no guarantees or assurances can be provided in relation to timing so please consider the effect this may have on the re-mortgage or the sale of your leasehold property.

We recommend seeking your own independent legal advice before deciding to proceed with a lease extension.

The advice should cover the legal, valuation and financial aspects of the proposed lease extension. You must make sure you have sufficient information and advice to decide whether a lease extension is the correct route for you.

To start your request to be considered for a lease extension you will need to complete and return to us our Lease Extension Application Form.  Please email leasehold@housingplusgroup.co.uk for more information. You will need to have a clear service charge and/or major works account or be on, and kept to, an agreed repayment plan in order to proceed.