The Leasehold Reform, Housing and Urban Development Act 1993 provides a well established mechanism for tenants/lessees to extend their lease based on fundamental valuation and legislative principles. There are also a range of timescales and requirements that they and the Freeholder/Landlord will need to be aware of. Ultimately these should act as a catalyst to expedite the process but if critical deadlines or details are missed the consequences can be significant.
The first timescale is imposed on the Landlord following the service of the initial section 42 notice by the lessee. In accordance with the Act the notice must contain the following information:
- The full name of the lessee and the address of the flat;
- Sufficient information about the flat to identify the property to which the application relates;
- Details of the lease including its date of commencement and its terms;
- The premium proposed for the new lease and or other amounts payable where there are intermediate leases involved;
- The terms that the lessee proposes for the new lease; (if different from the present lease)
- The name and address of a representative if one has been appointed; and
- A date by which the landlord must give his counter notice, which must be not less than 2 months from the date on which the lessee's notice is served
The notice will typically be served by a solicitor or surveyor who has experience in such procedures, but where a notice is deemed invalid it is usually due to it not being signed by the appropriate tenant (nobody, including a managing agent, can sign on their behalf).
The Landlord will look to instruct his own solicitor and surveyor upon receipt, and in all likelihood serve a counter notice complete with a counter figure for the premium, to arrive a day before his time period elapses. Failure to do so is severely compromising as the lessee can proceed to court for a vesting order to obtain the Freehold on the grounds stated in the original notice with no challenge from the Landlord.
It’s unlikely that the Landlord or his advisers would allow that to happen so what will usually follow is a period of negotiation between the two surveyors with a view to reaching an acceptable compromise.
Should the surveyors fail to reach a compromise either side can apply to the Leasehold Valuation Tribunal (LVT) no less than 2 months but within 6 months of the date of the service of the counter notice. In the majority of cases this proves little more than elementary, especially if the cost of going to tribunal is at odds with any outstanding monetary disagreement, yet if a case is heard the determination becomes final 21 days after it is sent out by the LVT.
Even with a binding decision there are still further timescales applicable under the Act to ensure the completion of the process. A draft contract must be provided by the Landlord within 21 days of the LVT's determination becoming final (this is referred to as the appropriate period). If the appropriate period elapses without exchanging contracts, then the lessee must then apply to court within a further two months for a vesting order.
Written by Justin Burns BSc MRICS of Fulham based Chartered Surveyors Peter Barry.