Pros and Cons of Non-Statutory Lease Extensions

Before deciding to serve a notice of claim on your landlord and exercising your statutory rights to a lease extension, it might be worth asking whether the landlord is willing to grant you a lease extension on a voluntary basis.

If the landlord agrees you could potentially save time and money. However there are disadvantages to taking this informal approach and whatever deal is reached should be weighed up against what you could achieve under the statutory process.

Below are the main pros and cons of a non-statutory lease extension:

Pros

  • Flexibility: the terms of a non-statutory lease extension are, in theory, open to negotiation between the parties. This provides the potential for greater flexibility when compared to a statutory lease extension (whereby the landlord must grant a new lease that is 90 years longer than the existing lease with peppercorn ground rent)
  • Speed: provided the parties are able to agree the terms of a non-statutory lease extension without dispute, the new lease can be granted straight away as there is no statutory timetable to follow
  • Costs: as there are no notices to serve, there is less legal work to carry out and all the leaseholder should have to pay for is the cost of drafting and registering the lease and obtaining their mortgage lender’s consent (if they have one)
  • Selling a flat: if the leaseholder is trying to sell their flat they usually want to sell it for as much as they can whilst spending as little as possible on the lease extension. A non-statutory lease extension has the potential to give them the flexibility to do this

Cons

  • Poor value for money: the premium demanded by the landlord may not offer good value for money. The landlord may be unwilling to negotiate and there is no scope for challenging their offer at a court or tribunal
  • Short term: the landlord may not offer to extend the lease by many years. For example, they may only offer to extend the lease to 99 years, meaning it will not be long until the lease needs to be extended again
  • Unsatisfactory terms: the landlord may impose terms that are not satisfactory from the leaseholder’s point of view. Because there are no rules that govern a non-statutory lease extension the landlord may refuse to grant the lease unless certain terms are included. A common requirement is that the ground rent is increased. The leaseholder has to be careful that this does not make the flat unsaleable
  • Lender’s consent: if you have a mortgage your lender will be required to approve the new lease and consent to its registration at the Land Registry. You will most likely have to bear the mortgage lender’s fees as well as your own in dealing with this aspect. In a statutory lease extension your lender’s consent is not needed because it is implied under the legislation
  • Challenging costs: the landlord will usually ask for you to pay their legal costs irrespective of whether the matter completes or not. Their fees cannot be challenged
  • No guarantee: even if the landlord makes you an offer, their offer can be revoked at any time before the lease is granted unless a formal contract has otherwise been signed

Written by Simon Masters

Senior Associate Solicitor

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