Statutory Lease Extensions – let’s talk about legal costs

posted on 01.02.2018 by Peter Scholl

A statutory lease extension is a tug of war between your landlord seeking to maximise the price and you seeking to preserve the value of your flat. Understandably anyone seeking a lease extension is concerned to know the anticipated costs of doing so. It would be marvellous to be able snap back a figure. But the answer must depend upon how much work is involved and how thoroughly it is approached.

The first stage of a statutory lease extension involves:

  • reviewing the title to the flat and all superior titles;
  • review of the wording of the lease in order to check that defects which may be corrected during the process will be picked up;
  • considering you will be liable to pay Stamp Duty Land Tax and if so, how much;
  • instructing a valuer and liaising with that valuer on the information required for the process and through the matter;
  • preparation of a notice of claim and service of it on the relevant landlord and on all others required to be served;
  • lodging a protective entry against the landlords Land Registry title;
  • deducing your title and obtaining from you a deposit equal to 10% of your proposed price for the lease extension for payment to the Landlord’s Solicitor;
  • coordinating access to the flat if it is required by the Landlord’s valuer.

and of course, reporting to and discussing with you throughout.

Typically my fixed fee for this stage of the work is £1,250 plus VAT. The chargeable expenses such as Land Registry fees and information are generally well within £50. This stage usually takes about a month.

The second stage is to receive the Landlords notice in reply to your claim which usually rejects the price you have proposed and your suggested lease terms in favour of more onerous ones. This is then discussed with you and your valuer. Your notice to the Landlord will say by what date that response is to be given but it cannot be less than two months.

My fee for that stage is based upon the amount of time expended on the work charged at my hourly rate of £275 plus VAT.  Typically it is £350 plus VAT.

However if the Landlord fails to serve its notice in time, or serves an invalid notice or seeks to claim that your claim is invalid then the matter will become contentious and could involve Court proceedings. My charges would then be at my hourly rate. In that unusual event I would advise you of the issues and provide you with an estimated budget and it would be for to decide whether or not to proceed.

The third stage involves the period of up to six months before which agreement about the new lease must be finalised or application must be made to the First Tier Tribunal. During this stage your valuer and that of the Landlord seek to agree the price and I seek to agree the form of the new lease with the Landlord’s Solicitors. Again my costs are based upon the amount of time involved. All too often agreement is only achieved after application to Tribunal is made and the Landlord is faced with having to incur costs in defending them. A typical fee is for these negotiations and application to the Tribunal is £1,250 plus VAT but it is impossible to predict how land and hard will be the stage. Only if you and your Landlord are far apart on the price or terms of the new lease would it be necessary for the matter to be heard by the Tribunal and that would be quite unusual.

Finalisation of the lease and completion of the purchase, followed by the lodging of a Stamp Duty Land Tax return and payment of that Tax as well as registration of the new title general incurs about three hours work (£825 plus VAT).

So in the above example my costs would be £2,850 plus VAT and some disbursements of about £50.

In the case of high value transactions relating to flats worth more than £1m I may reserve an additional fee of 0.01% of the price paid for the lease extension.

This can only be broad guidance because the variety of responses which can affect the course of the claim. That is why, after service of the notice of claim, my costs are charged on the basis of the time involved. That does not mean that you lose control of costs because you will be provided with regular updates both as to what is required and what is likely to be needed. I hope those updates will always be clear but clients are always welcome to ‘phone or meet me if clarification is ever needed.

Surveyors costs

I use different valuers according to location of the flat, value, identity of the Landlord. If you would like to proceed with me I will discuss with you the appointment of a valuer with a view to obtaining fee quotes.

Landlord’s costs

There is an excellent summary of the lease extension process here (a new window opens). This includes details of the Landlord’s costs which you will be required to pay.

Stamp Duty Land Tax

The price paid for the lease extension may be subject to this tax if the premium exceeds £40,000. Depending upon your circumstances the higher rates may apply.

Time Scales

Here is a typical time scale – of course every matter is different and this is purely illustrative.

Stage Description Estimated time
Initial Preparation and service of the claim 1 – 2 months
Response Receipt of the Landlord’s response 2 months and a week from date of service
Negotiations Discussions between Valuers and between Solicitors Up to 6 months from Landlord’s response
Protective Application to the First Tier Tribunal Before the end of 6 months from the Landlord’s response
Concluding Completing the purchase of the new lease Before the end of 4 months from the date upon which terms were agreed with the Landlord

All legal work is handled by me and is not delegated.

If you have any questions or would like to discuss any aspect of this matter, please do ‘phone me on 020-7025 2292.