Lease extension – Absentee landlords

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We have already dealt with in a previous article most of the details in relation to a lease extension and the qualifying parts and what to do.  We are now dealing with how preparing the tenants notice and what happens if there is an absentee landlord.

Preparing a tenants notice

The tenants notice does trigger legal procedures for buying a new lease and you are liable for the landlord’s reasonable costs from the date it is received.  It is therefore extremely important that you read our previous article on the costs.  The notice has to be accurate and contain no mistakes because although you can apply to the County Court to have it corrected there is a cost involved in doing this and it could avoid a huge expense.  If the tenants notice is incomplete it will not be valid and a competent landlord can reject it.  We will therefore always advise you to instruct a solicitor in this regard.

Please see our previous article in relation to what a competent landlord is.

You can also register the tenants notice with the Land Registry.  This ensures it protects you from the landlord then trying to sell the freehold.  It does not preclude them from selling the freehold but it lets anybody know that you are applying for your lease in the interim.

When you serve the notice this also fixes the “valuation date” as the date of the notice.  The valuation date is when any figures which affect the price and we could change it are set.  For example the number of years left on the lease and the present value of the flat.  It is therefore important that however long it takes to negotiate or decide on the price the price will be based on the figures that apply on that date that you serve the tenants notice.  We will always advise you to instruct a solicitor to prepare and serve such a tenants notice to ensure that it is correct.

What does the tenants notice include:-

The tenant notice must include the following:-

  • Full name and address of the flat
  • Enough information about the flat to identify the property that the application relates to
  • Details of the lease, including the start date and the number of years it was granted
  • The premium you are proposing for a new lease and other amounts you are proposing to pay if there are immediate leases involved
  • The terms you are proposing for the new lease
  • The names and representatives you have appointed
  • The date by which the landlord must give the counter notice, which must be at least two months from the date of the tenants notice.

You obviously need to appreciate that the premium quoted in the notice may not be the price that is actually agreed between you and the landlord.  You may find that a Tribunal may make a decision or negotiation with the landlord may be that the figure is more than has been stated.  The premium you propose must be a genuine opening offer.  It is not be quoted as a very low figure in order to reduce this as it may invalidate the notice.

What if I have an absentee landlord?

What is an absentee landlord? It is a landlord that you cannot get hold of in relation to the property and has not managed the property for many years.  You have to do all reasonable efforts to try and find them. In the event that you do not you have to do the following:-

  1. If the landlord is a company that is in receivership, you can serve the tenants notice on the receiver. If the landlord is an individual who is bankrupt you can serve the notice on the “trustee in bankruptcy” both the receiver and trustee are acting as the landlord for the time being, and under the 1993 Landlord and Tenant Act they must serve a counter notice and grant a new lease.
  2. If you cannot find the landlord, you cannot serve the tenants notice. In this case you can apply to the County Court for what is known as “vesting order” to extend the lease.  What is a vesting order?

Simply put it is a court order that passes the legal title in lieu of a legal conveyance.  It is an equitable remedy and therefore by its nature discretionary and the results from finding by a court of the way of passing one property to another.  This can be an expensive way of doing it.  If the court is satisfied that you are eligible for a new lease, it will grant the lease to you in the landlord’s absence.  The courts usually refer the case to the tribunal to decide how much the premium should be.  However, there is a specific application that you would need to make under the first tier Tribunal.  We would suggest in this instance that you speak to your solicitor dealing with this.

What are the subsequent procedures?

Once you have served the tenants notice the landlord can ask for evidence that you own your flat and how long you have owned it for.  The landlord has a period of at least 21 days from the date you serve the notice in which to ask for this evidence.  It is important therefore that you provide this evidence within 21 days.  If you do not then you can be prevented from having a lease extension and the landlord may serve you a default notice and ask the court to order for you to provide it.  The landlord also has the right to inspect the flat to carry out a valuation must they must give you at least three written days’ notice.

If your landlord wishes to be really difficult then after serving the tenants notice they can ask for you to pay a deposit.  This may be 10% of the premium you propose in your tenants notice or up to £250.00 whichever is the greatest amount.

What is the landlords counter notice?

The landlord now has to serve a counter notice to your notice, the date will be outlined within your notice and his must contain the following:-

  1. Admit your right to a new lease and expect your terms (or propose new terms of his own)
  2. Not admit your right and give the landlord reasons for this. The County Court will then decide on whether you have a right to a new lease.
  3. Claim the landlord has a right to develop. The landlord can refuse to grant the new lease if they can prove to a court that they intend to demolish and redevelop the building.  This only applies to applications where the remaining period of the lease is less than 5 years from the date of the tenants notice.
  4. When the landlord has served the counter notice and you and the landlord cannot agree on a price or some of the aspects of the sale of the new lease there is a negotiation of normally anywhere between two and six months. This is normally carried out by your own valuer/surveyor and he should liaise with you.  If after the first two months of the negotiation period you or your landlord can apply at any time to a Tribunal for an independent decision on the issue.  If they then decide to apply to a Tribunal your professional providers must have all the documents needed for this.

It would then go to the Tribunal and they would make a decision.

If the landlord does not serve a counter notice by the date stated in your notice you can apply to the court for a vesting order (please see above) The application is not for a court order requiring the landlord to serve the counter notice but effectively takes the matter out of the landlords hands by asking the court to grant a new lease.  The court has the right to grant a new vesting order on the terms proposed in your counter notice.  If you decide to a court for a vesting order it has to be done within six months of the date you should have received the counter notice.  Whilst this can be expensive it is your rights to do so and could actually work to your advantage.

What happens if I wish to sell my property?

Once a notice has been served by a tenant then you can assign any right of this notice with the lease.  It basically means that you can serve a notice and then sell the flat with the benefits of the application.  The person who buys the flat will be able to go ahead with the application immediately without having the need for it to be owned for a period of two years.  This will often help in cases when there are not many years left on the current lease and this represents mortgage difficulties for anybody considering buying the flat.  Please see our previous article.

What happens if I die before I buy the new Lease?

In this event your personal representatives can make an application for up to two years from the grant of probate letters of letters of Administration and will have the right to buy a new lease.

What are the normal terms of a new lease?

There are some statutory terms of the lease that you should be aware of and these are as follows:-

  1. A peppercorn ground rent (that is no ground rent at all) will be charged for the whole of the term and this will be a 90 year extension plus how long is left on your current lease.
  2. The new lease must be on the same terms as the existing one, apart from minor modifications and certain exclusions and additions that are allowed by law.

These are:-

  1. Modifications – to take out any alterations to the flat or the building since the existing lease was granted for example to gas lighting, cold stores and correct a problem with the lease.
  2. Exclusions – since the 1993 provides rights to continuously renew the lease, any existing clauses relating to a new lease or ending it early, or the landlords right to buy the flat if you decide to sell it should be excluded.
  3. Additions – a requirement not to grant a sublease which is long enough to give the subtenant the right to a new lease under the Act. You should always get legal advice on the above.

In Summary what are the procedures and the time limits:-

We can summarise these as follows:-

  1. You serve an information under Section 41 of the 1983 Act
  2. The landlord must respond within 28 days
  3. You serve the tenants notice under Section 42 of the Act
  4. The “valuation” date will be fixed as the date you serve the tenants notice.
  5. The landlord can ask for extra information, but they must do so within 21 days of receiving the tenants notice
  6. You have 21 days to provide any information the landlord has asked for
  7. The landlord must serve a counter notice by the date stated in the tenants notice. This date must be at least two months from the date you serve the tenants notice.
  8. If the landlord does not serve the counter notice by the date stated in the tenants notice you can apply to the court for a vesting order within six months
  9. After the landlord serve the counter notice, you or the landlord can apply to a Tribunal for an independent decision. You must do this sooner than the two months from but within six months of, the date of the counter notice served
  10. The fee for applying for a Tribunal can be varied as well as the hearing fee but these need to be paid
  11. The Tribunal decision becomes final after 28 days. If you do not agree with the Tribunals decision you can appeal to the upper Tribunal before the decision becomes final, but only if you have the Tribunals permission.
  12. After the Tribunals decision becomes final, you and the landlord have two months to enter into a new lease.
  13. If you and the landlord have not entered a new lease within two months of the Tribunals decision, final, you have a further two months to apply to the court for a court order to meet their obligations.

During the whole of the process if at any point you would like a quote for the insurance of the building to see whether your landlord is charging you more than he should then please don’t hesitate to contact us.

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