One of the best and worst things about a statutory lease extension are the deadlines. These are set out in the legislation.
The good thing about them is that they help ensure that your freeholder completes certain tasks by certain deadlines. This usually means that, from the point you serve notice your lease extension should be completed in no more than 12 months.
The bad thing is that, if they are missed, your claim could be “deemed withdrawn”. This is catastrophic because it means (a) you’ll have to wait twelve months from the date of withdrawal to make a new claim and (b) you still must pay your own and your freeholder’s legal and valuation costs to date – this could run to many thousands of pounds.
Sometimes is it not in the leaseholder’s (or their professional representative’s) power to meet deadlines – because another party is refusing to compromise or failing to act at all. If this happens, your professional representatives can take action before the deadline to protect your claim and stop it withdrawing. This is done through making an application to tribunal or court.
At Homehold, where possible, we complete our lease extensions as quickly as we reasonably can. This is to avoid getting too close to a deadline and having to make a protective application – which is always an unwelcome additional expense for our clients.
Below are the most critical deadlines which are associated with a normal lease extension process. There are others, but these are the ones which have a significant impact when missed.
Deadline 1: 80 Year Mark
While it is not strictly a deadline, the day a lease drops to having precisely 80 years remaining (i.e., the day before it drops to having 79 years and 364 days remaining) it gets suddenly much more expensive to extend.
This is because the law requires the leaseholder to pay an additional price known as “marriage value” to the freeholder. Sometimes this can double or triple the cost.
When you serve notice, the “valuation date” is fixed as the date at which the notice is received by your freeholder, so if even if your lease drops below 80 years during negotiations, marriage value won’t be payable.
Despite the fact the date is fixed when you serve notice, we always encourage our clients to start the process of extending the lease when it gets to no fewer than 81 years remaining. This is simply because if there are any complications identified when preparing or serving the notice, these can be resolved in good time before the deadline.
Deadline 2: Agreeing the “Terms of Acquisition”
Once your freeholder has responded to your notice (usually with a much higher figure than you have proposed) you must agree the price for your lease extension within six months of the date they serve the counter-notice.
Sometimes, depending on the way their counter-notice is structured, you must also agree the lease within this same six-month period.
If you can’t agree the price (and, if relevant, the lease) within the six-month period, you must make an application to the First Tier Tribunal to have the items in dispute decided by them.
At Homehold, we like to start making this application no later than the five-month mark. This is simply to ensure that we have ample time to submit it and receive confirmation of safe receipt from the tribunal service before the deadline.
Deadline 3: Completion
Once the Terms of Acquisition have been agreed, you have a further four-month period to complete the lease extension.
This usually means finalising the lease, getting each party to sign it (which can take a while - particularly if you have a third-party management company!), and agreeing the completion statement.
If it looks like this deadline will be missed, then an application must be made to the County Court to protect it. This is a bigger piece of work than a tribunal application and the fee payable to the court alone is a considerable £322. From the point at which the terms are agreed, we always like to complete the process within two and a half months. If completion is still elusive at the three-month mark, that’s when we advise our clients to instruct one of our partner-law firms to make the court application. Doing this at the three-month mark gives the law firm ample time to make and file the application.
Frequently Asked Question
If my freeholder's valuer or solicitor stops responding, how do you deal with it?
At Homehold we are known for being very proactive at chasing – most commonly the freeholder’s valuers for responses on premium. We often find we must wear them down to get the response we want! We will chase them via phone and email.
That doesn’t mean we will chase them every day – simply because in our experience it is not effective.
We once had a client who insisted we chased the freeholder’s valuer daily. The valuer unsurprisingly got cross, stopped responding to emails or taking calls at all - and eventually we needed to make a protective tribunal application.
How is it fair that if the freeholder drags their feet, I must incur additional costs and delays?
The legislation really isn’t fair to the leaseholder on this point – but it is the law and it is unavoidable.
If we’re unable to make the progress we need, sometimes all we can do is advise our clients to instruct a court or tribunal application to protect their position.
Can I delay the process, if I am not ready to complete or need time to raise the money?
Technically it possible to “stall” the process by holding off agreeing the premium or the terms of the lease to buy more time to raise funds.
We have had a client ask to do this recently while they got their mortgage sorted out.
It is possible to do this, but we advise against this – essentially because it can put you at risk of deemed withdrawal.
It is worth remembering that if you delay the application and then want to complete at the last minute, the freeholder might not be ready to complete – and whoever’s “fault” it is that a deadline is missed or a protective application is needed, it is still the leaseholder who loses out!
In conclusion, it is important to use a specialist firm to manage your lease extension. For example, Homehold have purpose-built deadline system which we review twice a week to ensure we're making sufficient progress on each case to meet the deadlines. A specialist firm will ensure that the various deadlines are met comfortably – and if they can’t be - the relevant applications are made to protect your position.
Equally, the leaseholder should aim never to delay their own lease extension – to leave enough wiggle room in the timelines to sort out any issues caused by the freeholder.
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