Written by Melissa Arslan
It is no doubt that the legislation governing leaseholds are outdated and has caused a great deal of problems over the years. There is currently two ways to proceed with a lease extension of a leasehold property; either by way of a formal lease extension pursuant to the Leasehold Reform, Housing and Urban Development Act 1993 or through an informal lease extension route.
There are pros and cons with proceeding under both routes, however, the formal route provides more security for leaseholders as there is an obligation on the landlord to respond to the notice requiring an extension. With that security, however, comes issues with regards to strict criteria that must be complied with. At present, there is a need for the leaseholder to be a ‘qualifying tenant’ meaning they would need to own the property for at least 2 years continuously. This can cause major issues with the formal lease extension process as it essentially restricts an individual to proceed if they have recently purchased the property for example meaning that they would need to wait another 2 years to be able to qualify.
The leasehold reforms that are presently with Parliament and the Leasehold and Freehold Reform Bill 2023-24 has now moved to the House of Lords for consideration. The reforms aim to make significant changes to the existing legislation on leaseholds. These changes, if passed, will include removing the two-year ownership rule and increase the standard lease extension term from 90 years to 990 years, with ground rent reduced to a peppercorn and will also ensure to making the process cheaper and easier for leaseholders. The Bill also aims to strengthen the leaseholder protections in the Building Safety Act 2022.
It is speculated that the Leasehold and Freehold Reform Bill is likely to be on track to receive Royal Assent by the summer this year.
Should you have any questions regarding lease extensions, please do not hesitate to contact the team.
