Thirsk Winton LLP

Voluntary Lease Extensions

Ever since the law was introduced allowing Tenants the statutory right to extend their long leases by 90 years and force Landlords to lower their ground rent payments to a peppercorn (i.e. zero), Landlords have often tried to offer a voluntary lease extension whereby they tempt Tenants with a lower premium for the extension but in return they insert higher annual ground rent payments.

Sometimes there can be benefits to such voluntary extensions, since the premium may be significantly lower and the cost and length of the process is reduced, however on the flip side those increased ground rents can actually mean that over time you end up paying far more than had you opted for a statutory extension.

Recent announcements from the Government in respect of proposed changes to the way leases are granted and can be extended, include a proposed prohibition on the inclusion of an annual ground rent above a peppercorn in any new lease. Should this become law then it would mean that Landlords would be unable to require higher ground rents in any lease extension even on a voluntary basis, thereby meaning that there would be nothing for them to gain in proposing a lower premium outside of the pre-existing statutory framework.

As a result Tenants will most likely find that Landlords will no longer offer voluntary lease extensions and instead force Tenants to have to always extended their leases under the more lengthy statutory route. Whilst this could be seen by many as being a disadvantage, in truth the statutory process provides more certainty to both parties as to the likely premium payable and the terms to be included in any new lease since, in the absence of agreement, the Property Tribunal can be requested to determine the matters in dispute, something they had no jurisdiction on if the parties were merely extending voluntarily.
It should of course be noted that even if this law comes to pass the parties could still extend the lease voluntarily if both parties can agree the premium and a peppercorn ground rent, however the likelihood of this happening without the need for some negotiation or determination by a Tribunal is small and the days of the voluntary extension could soon be coming to an end.

If you would like to discuss the various methods of extending your lease and whether or not it would be beneficial to do so at this time, then speak to a member of our Enfranchisement team today.

Shmuel Portnoy
Senior Associate Solicitor
Enfranchisement Department