Can a freeholder insist on an entirely new lease when granting a lease extension?

As part of the lease extension process under the Leasehold Reform, Housing and Urban Development Act 1993, the parties need to agree the form of the lease extension document itself.

This is usually negotiated alongside the price payable to extend the lease.

This part of the process can be simple if a straightforward document is provided by the freeholder’s solicitor and the principal terms that will need varying are (i) the ground rent to a peppercorn and (ii) the lease term to an additional 90 years to the existing length of the lease.

It can however also become a point of contention, with a number of freeholders using the lease extension process as an opportunity to replace the existing lease with an entirely new lease.


Pros and cons

This can be positive, if for example the existing lease has unworkable service charge and maintenance provisions, to the detriment of all parties. However, it can also be used to insert onerous and punitive provisions which favour the freeholder, such as high interest rates on late payments, high management fees and restrictions on sub-letting.

It is crucial to have a solicitor experienced in leasehold matters to guide you through the process.

This is particularly important if the flat is soon to be sold, as it is not uncommon for a buyer’s solicitor to spot an onerous new clause within a lease extension deed, which can adversely affect the sale price or cause the transaction to fall apart. In the worst-case scenario, this will require a further Deed of Variation (and payment of a premium) to remove the offending clause.

Tribunal decision

In the First-tier Tribunal case of Esposito v Anand LON/00AZ/LSC/2019/0133, the freeholder insisted upon an entirely new lease during the lease extension process, which included a plethora of new clauses creating liability for the leaseholder.

The leaseholder quite correctly challenged the point in the Property Tribunal and was successful in having the landlords draft lease struck out, with a simple Deed of Variation ordered in its place. If you are considering extending the lease of your flat, please contact Ricky Coleman, solicitor at Bate & Albon Solicitors