A statutory lease extension is usually put into place by a document called a “Deed of Variation”, which sits alongside your lease at the Land Registry.
This document extends your lease by 90 years and reduces your ground rent to £0. Otherwise, it should say that your lease stays broadly the same.
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!
There are a number of changes that can be added to the Deed of Variation, 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 at the end 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.
If your lease contains a genuine defect, there might be an opportunity for you or your freeholder to have this rectified.
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%.
If you have a known defect in your lease, please let us know when you instruct us to do your lease extension.
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 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 has previously ruled that this is not allowable.
In the landmark tribunal case, it was considered that if a change requires an entirely new provision in the Deed of Variation – 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.
Occasionally a change will be proposed by the freeholder which genuinely benefits the management of the block and your solicitor might accept this.
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.
There is limited scope for making changes to your lease.
If you do want a change made to your lease, please speak to us before we get started and we can see if this is possible.