A statutory lease extension is usually put into place by a short document which sits alongside your existing lease at the Land Registry. This is technically known as "Deed of Surrender and Regrant", but for this article we call it the "Lease Extension Document".
This document extends your lease by 90 years and reduces your ground rent to £0. Otherwise, the legislation states that it "shall be a lease on the same terms as those of the existing lease".
It was made clear in the case of Gordon v Church Commissioners for England [2007] EWLands LRA/110/2006 that entirely new clauses could not be added to the the lease in nearly all cases, although some modifications to wording may be allowed.
One of the major benefits of a statutory lease extension is that it dramatically reduces the opportunity for your freeholder to make unwanted changes to your lease. This is a key difference from an informal lease extension, where a freeholder can make any changes they wish – and these changes are rarely beneficial to you!
It is very important that you instruct a specialist to complete your lease extension, so they know what clauses can and can't be included in your lease extension - and how to negotiate them out.
At the same time, however, the restrictive legislation does mean that there is very limited scope for making your own changes to the lease - and certainly it's unlikely you'll be able to agree new clauses or deletion of ones you don't like.
Once a lease has been agreed between the freeholder's solicitor and the leaseholder's solicitors, usually it can't be revisited - even if the lease extension isn't completed.
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There are a number of changes that can be added to the Lease Extension Document, and the main examples are below:
Statutory Lease Extension Clause
This is a clause that states the lease extension is a statutory lease extension. This is a useful clause, because it means you don’t need to tell your mortgage lender that you’ve done a lease extension.
Redevelopment Rights Clause
This is a clause that gives your freeholder the right in the last year of your current term to apply to the court to make a compulsory purchase of your flat because they want to redevelop it.
This is similar to the statutory right which the government, councils or utility companies sometimes have to compulsory purchase property.
In many cases redevelopment won’t happen. If you are still in your flat in 50+ years, while this might not be very welcome, the court will insist your freeholder has to pay a fair price for your property.
Resolve defects
If your lease contains a genuine defect, there might be an opportunity for you or your freeholder to have this rectified by modifying the wording of an existing clause.
Just because you don't like a clause or it doesn't seem fair doesn't make it a defect in this context.
In order for something to be a genuine defect, it has to be considered one from both the standpoint of the freeholder and that of the leaseholder. It can’t simply be desirable to one or the other.
An example of where an issue was considered a genuine defect is where the % contribution each flat made to the service charge bill for a building did not add up to 100%. Rossman v The Crown Estate Commissioners [2015] UKUT 288 (LC)
An example of something which wasn't considered a defect was where the leaseholder only had access on foot to their garage but wanted it extended so they could access the garage with the car. The freeholder argued this wasn't a defect from their standpoint. Their argument was the drive was sufficiently narrow that if the leaseholder parked in front of the garage, it would have restricted other access rights. Park v Morgan [2019] UKUT 20(LC).
If you have a known defect in your lease, please let us know when you instruct us to do your lease extension.
Accommodate "Changes"
Where there has been a "change" since the flat was originally leased and where it would also be "unreasonable" not to alter the lease, an alteration might be allowable.
The types of “changes” which are considered relevant are things like changes to legislation, or inflation, which means the value of money goes down over time. A simple change in you or your freeholder’s opinion won’t cut it!
Acceptable examples include:
Notice Fee: Often leases require the leaseholder to give the freeholder "Notice" when they sell, mortgage or transfer the property. Often the freeholder charges a "Notice Fee" for updating their records.
Freeholders frequently increase in this fee when the lease is extended and this is acceptable, so long as the fee is not increased substantially more than inflation since the flat was originally leased. Sometimes a freeholder will replace a £ figure with the words "a reasonable fee", and the First Tier Tribunal (LON/00AH/OLR/2018/1105) has previously ruled that this is not allowable.
Unacceptable examples from our experience include:
No Hard Flooring: The freeholder wanted to introduce a brand new clause into the lease requiring the floors to be covered with carpet and prevent them being replaced with wooden or laminate flooring. They wanted to reduce noise transmission between flats and argued this was not unreasonable to include - but this justification isn't enough to include it in the lease.
Cost to approve alterations: The freeholder wanted to add new clauses which would require the leaseholder to apply to make changes to their flat which were not restricted under their current lease - such as replacing their boiler and fuse box. Again, this wasn't allowable.
No Airbnb-style letting: Where the freehold was owned by a consortium of other leaseholders, they wanted to introduce a restriction on letting the flats for short periods (i.e. on sites like Airbnb). There was no such restriction in the currently lease, so the clause could not be added.
Removal of restriction to keep pets: Some leases have an absolute prohibition for keeping pets. We've had leaseholders want to have this clause removed but there is unlikely to be any legal grounds for doing so.
Removal of "No Renting" clause: Some leases prohibit the leaseholder from renting the flat to someone else - clearly if you own a flat, then you might think this is unfair. However, there is unlikely to be any legal grounds to get this removed.
Equally, in the landmark tribunal case, it was considered that if a change requires an entirely new provision in the Lease Extension Document – rather than an alteration to an existing clause – then it is not allowable.
Changes by agreement
Where the freeholder and the leaseholder both want a change (or one doesn’t object) then it can be added to the lease.
In some cases, the freeholder may agree to a lease term change in return for a payment.
Occasionally a change will be proposed by the freeholder which genuinely benefits the management of the block and your freeholder might consider these acceptable.
Other Amendments
The article above includes the main categories of changes which can be made under the Leasehold Reform Housing and Urban Development Act 1993, but there are a few more which might affect you.
In conclusion...
There is limited scope for making changes to your lease.
If you use us to do your lease extension, if your freeholder proposes any changes that are not allowable under the legislation, your solicitor will discuss these with you before they accept them. In extreme circumstances it can be possible to make an application to tribunal to have them determine what can or can't be included, but it rarely gets to this point.
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