Leasehold Reform – Chapter 4 – Lease Extensions - Rights

In the first of our articles on the Law Commission's consultation paper, we seek to address the process and what enfranchisement rights should be.

After an initial consultation, the Law Commission has considered a number of options in relation to The Lease Extension process.  Their conclusions are as follows namely:

  1. They considered whether or not all leaseholder should be given the choice to extend, to eliminate ground rent, or to do both. Their ultimate conclusion, was that the decision of one leaseholder, would then affect subsequent leaseholders and also provide too much control to landlords.  As a result there should be no discretion in terms of a statutory procedure. The Law Commission therefore believe that the current procedure, whereby a lease is extended for a fixed term at low rent should remain. 
  2. The present regime allows a part of a leasehold interest (for example a garage) to be removed from the Lease Extension process, if it is not considered to form part of the demise.  The Law Commission is of the opinion that the leaseholder should have the right to extend the entirety of their leasehold interest, including any land over which they may have rights of occupation in addition to the main proportion of their premises.
  3. They are of the opinion that lease extensions should be granted on similar terms to the previous lease. The Law Commission considered whether or not it would be possible to standardise the wording of a lease when it was extended; but came to the conclusion that using a standardised lease would be too restrictive, particularly where the nature of flats changes from block to block. Further, they also believed to grant wider powers to change the existing terms of the lease would place to great an advantage on the part freeholders, who would sometimes have the funds to argue a point, in order to have the lease changed; for their benefit.  The Law commission was however confident, that the current provisions were uncertain as to conclusion, unclear about the items which could be altered, and as a result, they did need reform.  Equally on the other hand to remove the power altogether would be incorrect.

The suggestion therefore is that the lease can be amended on extension, but only if both parties agree to the amendment, or the proposed term is selected by one or another party from a prescribed list of list of model terms.

  1. The Law Commission considered lease extensions that were contracted into outside of the statutory regime. They considered, that if such steps were to be continued, it must be on the basis that the terms would be similar to those granted under the statutory process. This would ensure, that a landlord was not put in a position of too great power.  However, they have considered other options, such as prohibiting voluntary extensions; or allowing them on an unrestricted basis, but only following an alternative notice procedure initially.

Should you have any queries in connection with the above items, then please do not hesitate to contact this firm's Real Estate Department on 01702 338 338 or llancaster@paulrobinson.co.uk