Satutory versus Non-Statutory Lease Extensions

There are several pros and cons to both statutory and non-statutory lease extensions. The route you choose very much depends on your personal circumstances.

The informal lease extension process is quicker (it can be completed within one month), cheaper (the legal fees are lower) and it’s easier to qualify for (the statutory process requires that you have owned your property for at least two years).

However voluntary lease extensions also have their drawbacks. If you’re dealing with a savvy, professional landlord, for instance, they may impose harsh terms which will make it more difficult to sell your property. Furthermore you will still have to pay ground rent (which is waived with a statutory lease extension) and you will still need the mortgage lender’s consent. In addition you will have to pay non-refundable legal and valuation fees up front so if you can’t agree a premium you will lose your money (whereas the compulsory route guarantees you a lease extension).

Although the informal option can work out better, therefore, it is generally safer to go down the statutory route because the legal process protects the leaseholder. The Leasehold Reform and Urban Development Act 1993 ensures fair, fixed terms for the new lease:

Guaranteed lease extension: the Act entitles you to compel your landlord to grant you a lease extension. Unlike voluntary lease extensions, the landlord legally cannot refuse your request if you go down the statutory route.

Add an extra 90 years to your lease: whereas the terms of the new lease under an informal lease extension are open to negotiation, the statutory process guarantees the leaseholder fair, fixed terms. Foremost among these is the right to add 90 extra years to your lease, so if it currently has 79 years left to run it would have 169 after completion.

Never pay ground rent again: under the statutory route, the landlord has to waive their right to charge ground rent. Instead you will pay ‘peppercorn ground rent’, a nominal amount for which nothing will actually be charged.

Written by Simon Masters

Senior Associate Solicitor