What is a Statutory Lease Extension?

Over the course of time as the term of the lease reduces, so does the value of the Leasehold property. Furthermore, as the term of the lease gets shorter, the premium payable for the extension increases. Therefore, a lease is often described as a depreciating asset.

The Leasehold Reform, Housing and Urban Development Act 1993 (“LRHUDA”) provides leaseholders with the right to extend their lease; subject to certain qualifying criteria being met. In brief, the LRHUDA provides the leaseholder with a right to extend the lease term by a further 90 years and extinguishes the ground rent.

This is known as a statutory lease extension, which is an alternative to the voluntary lease extension route, whereby you would serve a Section 42 Notice on the landlord to extend the lease.

However, in order to proceed down this route you have to be a “qualifying tenant” which means that to be a qualifying leaseholder you must have owned a long lease for the past two years. With the Statutory route, certain notices and timetables must be adhered to in order to guarantee the extension of term by a further 90 years and extinguishing the ground rent.