Legal News | 14.05.21

Brief Guide to Lease Extensions and Enfranchisements

Tenants of flats have the right, with long leases, to either obtain a new lease of their individual flat (known as lease extension) or, act together to acquire the freehold of their building (known as lease enfranchisement).

These rights were introduced by the Leasehold Reform, Housing and Urban Development Act 1993, and has since been amended and extended by subsequent legislation, mainly the Housing Act 1996 and the Commonhold and Leasehold Reform Act 2002.

Lease Extensions

The law gives all qualifying tenants the right to extend their lease once they have owned a lease of at least 21 years, for at least 2 years. The lease must also be held within a qualifying building. The terms of the new lease must be granted on the following basis:

• The term will be equal to the unexpired residue of the existing lease, plus a further 90 years.
• At a premium, which is based on the formula set out in the Leasehold Reform Housing and Urban Development Act 1993.
• At a ‘peppercorn rent’.

When making a claim for a lease extension, notice of claim by the tenant needs to be served on the competent landlord and any third parties to the tenant’s lease. The competent landlord is the person with an interest in reversion to the tenant’s lease and who has the capacity to grant the new lease. Once the notice has been served, the statutory procedure to extend the lease then begins.

Lease Enfranchisement

For collective lease enfranchisement, tenants of flats acting together have the right to purchase the freehold and any headleases of the building. Tenants, if they qualify, have the right to force the sale of the freehold of the building or part of a building.

In order for a building to qualify under the Act, it must satisfy the following:

1. It must be an independent building or be part of a building which is capable of independent development;
2. It must have at least two thirds of the flats held by qualifying tenants;
3. It has no more than 25% internal floor space which is used for non-residential purposes; and
4. The building is not part of a railway.

In order to be a qualifying tenant, you must have a long lease, which is a lease consisting of more than 21 years when it was first granted. However, a qualifying tenant cannot own more than three flats in the building and you will not be a qualifying tenant if you hold a business lease.

Preparing a Claim for Lease Extension or Lease Enfranchisement

In order to claim either of these, the correct statutory procedures must be followed. This will involve serving detailed notices, in the correct prescribed form on the relevant parties and negotiating the relevant terms for the extension or acquisition.

If you would like to discuss a lease extension or enfranchisement further, or would like more information on the statutory claim procedure, please get in touch with your usual contact or email josh.taylor@wansbroughs.com