Leasehold Guide

Purchasing a leasehold property is different from purchasing a Freehold property. The main difference is that a leaseholder will pay a ground rent to a freeholder for the right to live in the property for a set number of years.

In recent years the number of leasehold houses has grown in recent years, due to housing pressure in areas of high concentration. Kerr and Co have given professional advice to buyers and sellers since 1993 with local unrivalled knowledge throughout your entire property journey. We pride ourselves on combining traditional customer service with market lead communication whilst working hard to be a modern agency that care.

 
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Changes to Leasehold

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Leasehold Reform

Reforms to leaseholders' will give greater rights, protections and control over their homes alongside plans to bring the feudal leasehold system to an end. Following the announcement of the UK General Election on 4 July 2024 both the government and opposition parties agreed that the House of Lords would consider the Leasehold and Freehold Reform Bill before the formal dissolution of parliament.

View Government Press Release

Leasehold Reform

Reforms to leaseholders' will give greater rights, protections and control over their homes alongside plans to bring the feudal leasehold system to an end. Following the announcement of the UK General Election on 4 July 2024 both the government and opposition parties agreed that the House of Lords would consider the Leasehold and Freehold Reform Bill before the formal dissolution of parliament.

View Government Press Release
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outstanding issues

However, there are still a number of outstanding issues which the current Labour Government have promised with a Bill being drafted during the second half of 2025, and an expectation that reform will be implemented before the end of 2029.

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outstanding issues

However, there are still a number of outstanding issues which the current Labour Government have promised with a Bill being drafted during the second half of 2025, and an expectation that reform will be implemented before the end of 2029.

View Government News Story

Section 42 Notice

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Formal Route

Once you have a figure there are then two ways of proceeding this being either formally or informally. The formal route would mean serving a Section 42 Notice on the freeholder which details the proposed amount you are willing to offer for the lease extension (Bearing in mind this may not be the price you eventually pay after negotiations). At this point the benefit of the notice can be assigned to a potential buyer securing their rights to continue the process and establish the principle costs involved.

Once the Section 42 notice has been served the freeholder has a period of two months in which to serve a counter notice (Section 45) either accepting or rejecting your offer. In the event of rejection the freeholder's counter notice will detail the premium they would be willing to accept. If the freeholder deems the premium proposed in the Section 42 notice is derisory he or she can apply to the courts to have the notice struck off and you would then need to wait a further 12 months before serving a new notice.

Formal Route

Once you have a figure there are then two ways of proceeding this being either formally or informally. The formal route would mean serving a Section 42 Notice on the freeholder which details the proposed amount you are willing to offer for the lease extension (Bearing in mind this may not be the price you eventually pay after negotiations). At this point the benefit of the notice can be assigned to a potential buyer securing their rights to continue the process and establish the principle costs involved.

Once the Section 42 notice has been served the freeholder has a period of two months in which to serve a counter notice (Section 45) either accepting or rejecting your offer. In the event of rejection the freeholder's counter notice will detail the premium they would be willing to accept. If the freeholder deems the premium proposed in the Section 42 notice is derisory he or she can apply to the courts to have the notice struck off and you would then need to wait a further 12 months before serving a new notice.

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Informal Route

The informal route would be for you to contact the freeholder directly and make them an offer - although sometimes the freeholder will then insist upon going down the formal route of notices being served. The statutory extension of 90 years at a peppercorn ground rent need not necessarily apply in these circumstances as alternative lease arrangements can be agreed. Again once agreement is made on the cost of the lease extension you would need to employ the service of a solicitor to complete the process as with the formal route.

Informal Route

The informal route would be for you to contact the freeholder directly and make them an offer - although sometimes the freeholder will then insist upon going down the formal route of notices being served. The statutory extension of 90 years at a peppercorn ground rent need not necessarily apply in these circumstances as alternative lease arrangements can be agreed. Again once agreement is made on the cost of the lease extension you would need to employ the service of a solicitor to complete the process as with the formal route.

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In Agreement

Once both parties are in agreement then it would be up to your solicitor and the freeholders solicitor to draw up the new lease ready for signature and eventual registration at land registry. You have a period of 4 months from formal agreement to finalise and pay the premium otherwise you would need to apply to the courts for a extension or run the risk of having to wait a further 12 months to start the process again.

In Agreement

Once both parties are in agreement then it would be up to your solicitor and the freeholders solicitor to draw up the new lease ready for signature and eventual registration at land registry. You have a period of 4 months from formal agreement to finalise and pay the premium otherwise you would need to apply to the courts for a extension or run the risk of having to wait a further 12 months to start the process again.

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No Agreement

If no agreement can be reached either formally or informally you then have the right to apply to the Leasehold Valuation Tribunal who would consider the case and make a binding decision on both parties as to a fair cost of extension. However you need to have applied to the L.V.T. within six months of the date of the freeholders counter notice (Section 45) otherwise you will be deemed to have withdrawn your application for lease extension and would then need to wait a further 12 months before repeating the process.

No Agreement

If no agreement can be reached either formally or informally you then have the right to apply to the Leasehold Valuation Tribunal who would consider the case and make a binding decision on both parties as to a fair cost of extension. However you need to have applied to the L.V.T. within six months of the date of the freeholders counter notice (Section 45) otherwise you will be deemed to have withdrawn your application for lease extension and would then need to wait a further 12 months before repeating the process.

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Additional Costs

There are additional costs involved with extending your lease, these being the "reasonable costs" incurred by the freeholder in ascertaining their own opinion of value, namely their professional advisors including surveyor and their legal representation, in finalising the process. You would also be liable for your own legal costs and surveying costs.

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Additional Costs

There are additional costs involved with extending your lease, these being the "reasonable costs" incurred by the freeholder in ascertaining their own opinion of value, namely their professional advisors including surveyor and their legal representation, in finalising the process. You would also be liable for your own legal costs and surveying costs.

View Government Legislation

Glossary of Terms

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