Extending a lease to avoid ground rent doubling

Callie Tuplin, lease extension solicitor and specialist in residential leasehold law, worked with and advised a couple that had been contacted by their freeholder to be told their ground rent was soon to double.

The clients purchased a leasehold flat in London together eight years ago. Having been paying a ground rent amount and service charge for that eight year period without issue, they were shocked to receive a letter from the management company informing them that their ground rent was due to double. Unbeknown to them, there was a clause in their lease stating that ground rent would increase once the term of the lease fell to 85 years remaining, which was due to happen within the next year.  

Clients in London in need of prompt, specialist advice:

The clients were aware of the lease, of course, but confessed to not appreciating the ground rent would double and, having been there for several years, they had not reviewed the lease any time recently and had not realised the date for the ground rent to double was approaching.

Reluctant to pay this ground rent escalation and unsure as to the accuracy of information they were getting from online sources of information which were presenting as many questions as answers, and being unsure of their options, the couple contacted Holmes & Hills lease extension solicitors to obtain specialist, free initial lease extension advice.

Providing free initial lease extension advice:

Callie Tuplin, Holmes & Hills’ specialist lease extension solicitor, was able to advise the clients as to exactly what their situation was and what their options and rights were. Callie advised the clients that they were, based on the information provided, 'qualifying tenants' and therefore had a statutory right to extend their lease.

Callie highlighted to the clients that as well as the ground rent soon doubling, the remaining term of 85 years could cause them additional issues such as making it more difficult to remortgage and release equity from the property, as well as making it more difficult to sell at an attractive, full market value, should they come to wish to move.

It was explained to the clients that both the issue of the doubling ground rent and the decreasing lease term could be dealt with by extending the lease. Callie explained to the clients that extending the lease via the statutory process would provide for a new lease with an additional 90 years (so 175 years) with a peppercorn (£nil) ground rent.

Approaching the freeholder for an informal (non-statutory) lease extension:

Callie understood the time sensitive nature of the matter and recognised the clients' wish to keep their professional fees under control. Callie therefore advised the leaseholder on the best course of action to take, this being to approach the leaseholder with a view to gauging whether they would be prepared to extend the lease and negotiate the terms informally. Callie explained that a benefit of proceeding via the informal (non-statutory) route, where appropriate to do so, is that the clients' and the freeholder's professional fees (also covered by the leaseholder) are likely to be lower. The clients instructed Callie to contact the freeholder on their behalf.

Whilst the freeholder was willing to negotiate informally, Callie established that they were not willing to remove the doubling of the ground rent from any newly negotiated lease. Since avoiding the doubling of ground rent was a critical factor for the clients, Callie recommended to the clients that she implement the formal (statutory) lease extension procedure on behalf of the clients.   

Instructing a lease extension valuer and serving the claim notice:

Callie instructed a specialist lease extension valuer on behalf of the clients in order to obtain a professional and accurate lease extension valuation and then issued a Section 42 Notice with proposed terms and appropriate deadlines to the freeholder. Once the freeholder had undertaken their own professional valuation they made a counter offer which was slightly higher, but still well within the value range guidance provided by the valuation report Callie had received. Callie discussed this with the clients who were happy with the premium which the freeholder had countered with.

Reviewing the lease and completing the lease extension:

Following reaching agreement as to the 'premium', Callie reviewed, scrutinised and reported on the draft new lease, ensuring the freeholder's solicitors had 'modernised' the lease appropriately, without proposing clauses which would be onerous for Holmes & Hills' clients. Following amendments to the draft lease being made and agreed, the new lease was signed and Callie dealt with the registration of the new lease with the Land Registry.

A new 175 year lease with peppercorn ground rent:

Callie facilitated a statutory lease extension for the clients, assisting them in making informed decisions right from the outset. This resulted in them being issued with a new 175 year lease (additional 90 years) and not only did they avoid their ground rent doubling, but this was reduced to a peppercorn (£nil), achieved through the payment of a premium which the clients were satisfied with.

Dealing with clients via telephone and email:

Callie, based in East Anglia, dealt with the clients, based in London, via telephone and email, using electronic ID searches to undertake client due diligence. With this approach, there was no need for Callie and the clients to meet during the course of Callie assisting them, nor for the clients to visit one of Holmes & Hills' offices, nor for the clients to send any original ID to Callie.